Greeks withdrawing cash

If anything demonstrates how far we are all removed from free market capitalism and an economic system based entirely on private property rights, one need only look to see the power the state has on the resource most people have as a medium of exchange and storage of value - money.

With speculation rising about the next Greek government quite possibly being led by a quasi-communist who thinks he can call the bluff of Eurozone governments in demanding that they lend the Greek government more money it can't pay back (having already received bailouts worth nearly a quarter a trillion Euro), fear is that the bluff wont work and Greece will be cast adrift, with the Greek government unable to pay its bloated public sector, unable to pay interest on its debt and pushed out of the Eurozone.

With all of that goes any talk of European solidarity, as quite rightly, Germans, Austrians, Dutch, Slovaks, Estonians and the like say no to their government funding Greece's fiscal incontinence, so Greece finds a new way to pay its bills - by printing worthless banknotes likely to be called a New Drachma.

What does the average Greek citizen do then?  Well, Greek banks get all their assets and liabilities redenominated into this junk currency, so the savings of Greek people get utterly destroyed, because of the Greek government.  Greek companies with debts with foreign banks in Euros face bankruptcy as they will be unable to pay debts using the junk currency.  

Many Greeks will seek to flee to live and work in the rest of the EU.

Except the EU has other ideas.  Greeks will be cast asunder, not only having their savings plundered and destroyed by their government, but having their fellow EU partners treating them as foreigners, not worthy of being able to live and work in other Member States.   The grand political project would be over as far as Greece is concerned.  This shameful treatment of people unfortunately stuck in a country that the EU embraced, subsidised and treated fraternally for decades, shows the real limits of the openness of the EU - when the going gets tough, they turn their back on you.

So Greeks are preparing.  With 800 million Euro exiting Greek bank accounts today, this will only accelerate.  Once they have their cash, they will deposit in foreign banks, convert it to gold or silver, or simply stuff it under the mattress.

For you see when it comes down to it, a fiat currency isn't a store of any real value if those who issued it declare it to no longer be so - for it is as easy to destroy that which you printed out of thin air.

For all the SYRIZA party is offering Greece is the promise that all can be made better out of the thin air of socialist economics.

UPDATE:  A former Socialist Defence Minister of Greece is facing charges of money laundering and is facing ongoing investigation for tax dodging.   Is it any surprise that so many Greek citizens actively avoid tax when then is corruption at the highest levels by those who want to spend their money, but make sure they use the state to enrich themselves?  Shame the political choices of Greeks are largely more of the same.

Only the state should dominate the media, right Ed?

The ludicrous circus that is the Leveson Inquiry, has been filling media time for many weeks now.  In part because the media is so excessively solipsistic it think everyone else gives a damn.  Most don’t.

The key “story” being manufactured by this waste of time and money is whether News Corporation and Rupert Murdoch have “undue influence” over politicians.   The inquiry is meant to have a wider mandate that beating up on News Corp, but it is driven by politicians and bureaucrats whose agenda has that narrow focus.   

It’s important to bear in mind the extent to which News Corp is allegedly dominant in the UK media.  It owns, effectively, two daily newspapers.  The tabloid Sun and the more serious Times (and Sunday Times).  Like most British papers they don’t shy from expressing editorial views regarding politics.   However, that isn’t unusual.  The Sun’s direct competitor, the Daily Mirror has long been seen as a left wing tabloid, consistently supporting Labour (which of course means accusations of impropriety aren’t flung its way).  Its other competitors in the tabloid market (such as the Daily Star) take next to know interest in politics.  The mid market Daily Express and Daily Mail have tended to take an angry “anti-politics” view that slammed the last government and are not much more keen on this one.   

Of the serious papers, the Guardian/Observer is the leftwing rag of record, followed closely by the Independent, which largely tended to sympathise with the Liberal Democrats.  The Daily Telegraph has long been seen and acted as the “Torygraph”.  

This diversity of newspaper choice is astonishingly wide, and whilst the Sun and the Times are influential, it is generous to claim either are dominant, when the market is so split among others.  The Daily Telegraph remains the leading circulation serious paper, although the Sun leads the tabloids.

In broadcasting, BSkyB (minority owned by News Corp which sought to take it over 100%) is the major pay TV provider, yet it has competition in that market from Virgin Media (for the half of the country with cable TV) and BT.   However, the most influential broadcasters remain the TV extortion tax funded BBC and commercial operator ITV (followed closely by commercial state owned broadcaster Channel  4).  Sky News is one of the news channels, but it faces direct competition from the 24 hour BBC News channel (let alone a panoply of foreign ones).

So when Labour leader Ed Miliband decides that newspapers shouldn’t be “allowed” to have more than “20% of the market”, you might ask some questions not only about what he means by that, but why he thinks it is ok for the state to be dominant in TV and radio broadcasting.

For a start, the “market” he says is not clearly defined.  Does he mean nationwide newspapers?  What about local or regional newspapers?  Besides which, what if people actually LIKE buying the newspapers with bigger market share, does it mean that a proprietor with a very successful newspaper must do something to be less successful?

All this nonsense is taken even further when one looks at the British government’s overwhelming presence in the broadcasting market.

It owns two major free to air broadcasters.  The BBC and Channel  4.

The BBC itself has seven fully owned national TV channels, and owns a 50% shareholding in a company that broadcasts another ten channels.   It also has nine continuous nationwide radio stations and a network of regional and local radio stations.  

Channel  4 has six fully owned national TV channels (and five timeshifted +1 channels on top of that).

The state is by far the dominant TV and radio broadcaster in the UK, with its channels gaining a majority of the audiences in both media.  The BBC is also one of the most popular websites.

Of course it should hardly be surprising that the Labour Party thinks the state supplying news and entertainment to the masses is a good thing, since it presided over the rapid expansion of the BBC when it was in government.   However, this is a point the Conservative Party should be making.

Media dominance is the newspaper sector in one of the most competitive newspaper markets in the world is ludicrous, particularly when it is a sunset industry as circulation continues its ongoing erosion and people seek out online media and other options.

The questions raised about the influence of a single proprietor of two newspapers and one TV news channel are never raised about a vast organisation that dominates the TV and radio market, that has been recession proof (having been funded by a extortion racket called the TV licence that criminalises people who don’t pay it and haven’t the wherewithal to evade it successfully).  

The state should not have its hands on so many levers of media in a free society, out of principle.  That’s setting aside the myth about the impartiality of the BBC and Channel  4, both of which carefully select stories to report on with a line that demonstrates a certain perspective (for years, Euroscepticism was treated as the view of cranks, but not now).

I don’t have to buy the Times or the Sun or subscribe to Sky TV in the UK.  The influence of Rupert Murdoch on me is my choice.  I also don’t have to watch or listen to the BBC, although if I have a TV I am forced to pay for it regardless of whether I want it or not.

Attempts to restrict media ownership when plurality of the print media is so obvious are absurd, particularly when attention ought to be drawn to the dominance of the state in British broadcasting.  That dominance is not only unnecessary, but it is unsettling and has a profound influence upon political and public discourse.  It is about time a debate is had about weaning the UK public off of state broadcasting.  Privatising Channel  4 should be an uncontroversial early first step.   The bigger step should be weaning the BBC off of the TV licence fee so that every day it has to convince people to pay for it, not threaten them with court.

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.

Spain's bailout for dummies

What's gone wrong?  A cluster of Spanish banks loaned money during the credit boom years of low interest rates in the Eurozone to a large number of investors whose investments have now proven to be worth far less than the loans.  Most of this is the property bubble in Spain which has popped, with property values dropping by 30-50% in some places.  The banks are facing insolvency because if they write off the bad loans they will fold.

It is not a sovereign debt crisis of the kind being witnessed in Greece.  In fact Spain's total national public debt as a proportion of GDP is less than Germany's (although it has had a serious budget deficit issue risking escalation of that debt) at 68.5%, although it was predicted to hit 78% at the end of this year.

Whose fault is it?  It takes three to tango this one.  None of these loans would be taken out if people or businesses hadn't borrowed to "invest" in the Spanish property bubble.  Nobody forced them to do this, so they bear responsibility for their own personal tragedy of poor choices and being lumbered with liabilities.  Of course, they wouldn't have received such loans if the banks had been more prudent about their predictions about the property market and had considered the risks of an inflated property bubble.  So the banks bear responsibility for lending money in circumstances that were overly optimistic.  Finally, the European Central Bank sets the interest rates for banks accessing its fiat currency.  As interest rates were set based predominantly on the dominant economic drivers in the Eurozone of Germany and France, this effectively created a line of cheap credit out of nothing at all.   Of course, since the European Central Bank makes money from thin air, it doesn't really bear any consequences of anything, as it is those who own and loan the currency that bear those consequences.

Why should governments get involved?  They shouldn't.  The banks should go bust.  Their shareholders and creditors should bear the losses.  At the most, if there is a deposit insurance scheme, then depositors up to a certain level should be protected, but there is no good reason for governments to do anything other than to have a framework within which bankrupt banks can wind down.   Of course, regional Spanish governments own a majority of the largest bank being bailed out - Bankia - which indicates that it going bankrupt means that those governments lose their "investments".   Naturally, none of them are very keen on this because they want their own decisions to be vindicated.

Why doesn't the Spanish government do it?  It can't afford to do so.  Whilst its relatively new government is eagerly cutting spending (and increasing taxes) to cut the rampant overspending of past governments, it is finding that interests rates on newly issued sovereign debt lie over 6%.   If it was to try to swallow the bankrupt banks it would see its debt as a proportion of GDP slide up by another 9% of GDP bringin it close to 90% (and 100% in 2-3 years' time).  It doesn't want to do that, and claims that Eurozone countries are like a big cozy club that look after one another (although German, Dutch, Austrian, Slovak and Estonian taxpayers might have a wry laugh at how one way that relationship is).

Where is the money coming from for this bailout?  Thin air.  It is part of the slow fiat currency issuing of the Eurozone called the European Financial Stability Fund, which is to become the European Stability Mechanism.   In both cases, they can only lend money to governments, so the Spanish Government will be effectively borrowing from its Eurozone supporters, adding to its public debt, pass on the money to the banks (presumably in the form of capital) and the banks will then pass on that money to the European Central Bank to provide liquidity in the face of their bad debts.  Of course don't think that making money out of thin air and passing it through a merry-go-round has no cost.

Who will pay?  Taxpayers directly in the solvent Eurozone countries (i.e. excluding the PIIGS) and all Euro currency holders indirectly, as they contributed involuntarily to a fund to socialise the losses of the banks.  Spanish taxpayers will be expected to pay too, as they guarantee the repayment of the "credit line", so ultimately will have to pay more unless miraculously the bailed out banks can be sold for more than the bailout funds.  Of course, given Spain's precarious budget deficit, public debt and national economic position, the real risk is that it lays the path for Spain to follow Greece - and so demand more money from Eurozone taxpayers.

Who will win? Creditors of the bailed banks (even if they face major writedowns in their shareholdings).  Owners of Euro debt in Spain.

Who will lose?  Taxpayers across the Eurozone, who collectively will see more of their future earnings diverted to save bad investments.  Ultimately this means the Eurozone economy being dragged down a small notch, again, for many years.  Holders of Euro currency deposits or cash lose as well, because it ultimately contributes to inflation.

What happens next? The markets will lemming like treat all of the propaganda around this bailout as gospel, and get a sudden shot of confidence, until the realise it helps to inflame a sovereign debt crisis in Spain.  The Eurozone economies will be no more better off.  Economic growth will not be facilitated.  The lunatic far-left parties in Greece (including the fascists) will clamour that Greece should get the same support, as will Irish politicians and those in other profligate Eurozone countries.  None will acknowledge that this is not about sovereign debt and actually increases Spain's sovereign debt.  People in France will have voted for a socialist Parliament, which will seek to continue the "print it and bail them out" philosophy that pretends that fiat currencies can be used to just print your way out of recession.  The ideological debate in Europe will continue between three groups:

-  Austerity and Integration:  Led by Germany, it is the view that things will get better if only the PIIGS would follow the policies of the 5 or so Eurozone countries that have budget deficits lower than GDP growth, improve competitiveness and then create a new European Treaty that harmonises budgetary, taxation and economic policies. Spain's current government has tended to share this view too.

-  Profligacy and Integration:  Now led by France, but also driven by leftwing and populist politicians in the Eurozone.  It is the view that the Eurozone should socialise its gains and losses.  In other words, Germany and others should pay for the debts and deficits of the PIIGS, and there should be extensive transfers across the Eurozone, as if it was a United States of Europe.  

-  Disintegration:  A growing view that the Euro is unsustainable in its present form, and the way to resolve the crisis is for it to split into two zones or multiple independent currencies, so that the PIIGS can devalue their way to "competitiveness", and the European project becomes a looser free trade association and customs union.  This is the view of Eurosceptics generally, although there are versions of this argument against any form of open Europe (from Marxists and fascists) or against new small fiat currencies (supporters of commodity-based currencies).

The one thing is sure, don't expects sun to rise and everything to be rosy.  For the Greeks have to vote again to decide if they want to swallow reality and take their medicine, or run away from it and truly see what it takes to become a tinpot backwater that makes Albania look good.

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.