Matt McCarten wants your money

Given he believes in a bigger state, he believes in compulsory welfare, state monopoly education and health care, it is hardly a surprise.

However, he has an odd view of "fairness".

He thinks, as do most socialists, that the imperative behind those supporting the free market in wanting lower taxes is greed. They think simply that people who are relatively successful want more of their own money and to hell with everyone else. The concept that we actually are suspicious of an ever growing state, see abject failure in the state addressing poverty and social mobility, is beyond the likes of Matt.

You see he loves the state, the state for him is the embodiment of humanity. It is a democratic expression of the "people's will" and it both protects and serves. The more it does, the better we all are for it. Given Matt spent much of his political career advocating for the Alliance, an openly socialist political party, this is hardly surprising. He sees the state as an instrument to take by force from those he deems rich to give to those he deems poor - the rich implicitly having not earnt their money "fairly", and the poor, well it isn't their fault, is it?

Matt says: "We need our public services". Hold on. Who is this "we"? Most would accept that they need health care and education, but separating who pays for it from who provides it creates all sorts of problems of performance. Matt doesn't believe this though. He thinks that when people pay taxes they can keep the state health and education sectors accountable for what they receive, even though it's clear that this works rather badly. However, he has spent much of his life representing suppliers, as in workers. He hasn't ever represented consumers of services, and certainly not those paying for it.

He then goes into his favoured taxes, like capital gains tax and death duties. Then he brings up the tired old nonsense of financial transactions tax, without blinking an eyelid as to how the financial sector could avoid much of it by engaging in most transactions offshore.

He says "Most of us wouldn't even notice it. But those who buy big-ticket items would. That's why the ruling class won't do it.". If Matt put down Das Kapital for a second he might think that "big ticket items" might get bought offshore with offshore bank accounts, and there will be other useful techniques to avoid the tax. However, he's cleverer than those who seek to protect their money.

That's a phrase he doesn't understand. To Matt (and many others on the left) taxes are not the money of those who own it, but the state's money - so it can be used for the benefit of the vested interests who best convince politicians to spend it on them and then all others.

Then he makes something up: "Twenty-five years ago we were told that if we cut taxes for the rich and raised taxes on the poor then we would work harder and earn more. It was nonsense then. It's nonsense now."

Who told you that Matt? Who ever called for raising taxes on the poor? In fact, name ONE report or one person who ever supported this? It's a bright Marxist red herring, as nonsense as he says.

The bigger argument is what the role of the state should be. The welfare state in its current form has produced a culture of dependency and entitlement that is not earnt, and needs to be urgently addressed. By keeping those who pay for health and education far apart from those who deliver it, patients and parents find it difficult to influence outcomes and to ensure that those providing those services are accountable to them.

Other countries have adopted significantly more consumer friendly approaches to both health and education that are hardly radical. Sweden's voucher approach to education is difficult to rebut as a significant first step to increasing diversity and accountability for that sector. Singapore's approach to health care has also resulted in far higher degrees of accountability for service delivery, and a greater interest by individuals in their own health care.

Matt prefers the world of - you earn more, you consume less, then you pay more taxes to pay for the health, education and welfare of everyone else (few of whom are ever grateful for it). He likes state monopolies in those sectors so that the workers can command ever increasing incomes from taxpayers by organising themselves as labour monopolies, so that there are more workers, less work and more pay.

You see the very greed and so called selfishness Matt attributes to the rich is exactly what the trade union movement of which he is a part of, demands for its members.

Absolutely none of it is to do with fairness, none of it is to do with users of state provided services and certainly none of it is to do with taxpayers getting value.

It's just from each according to their ability to each according to their means for Matt.

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.

Child protection law misdirected

There should be some irony in seeing that the day it is announced that parents will be able to check neighbours, friends or partners to see if they have convictions for being a pedophile, that the two parents of the Edlington sadists have name suppression.

The children who are the victims of their children are reportedly frightened that the sadists, who have permanent name suppression and will get new identities, (thanks to the mugs who paid for them and their parents to be fed, clothed and housed), will kill them once released. The other disturbing element is that the two victims no longer wish to associate with each other, in part because the sadists forced them to perform sexual acts on each other.

Allowing parents to ask the Police to check whether an individual has a "child sex offence", seems reasonable to most parents. However, there are a whole range of serious flaws in the idea.

1. The definition of "child sex offence" isn't clear, but it is plausible that it will catch those guilty of relatively minor offences - the classic teenage "oops she was 15, I thought she was 16" situation, where there is consent and the "offender" is only a few years older. However, that person will be deemed to be a "child sex offender" as much as someone who brutally abducts and rapes small children. There is no equivalency between them, but it will greatly hinder the rehabilitation and reintegration into society of those who have essentially committed victimless crimes. Surely if it is to happen, shouldn't there be a definition that weeds out the latter cases?

2. The hysteria about child sexual offences alone has left out the obvious. Rapists and anyone who commits violent offences are completely ignored. What mother would rather know if the man they are going out with is a rapist - of women - or has served time for bashing a previous woman? Why is this not important, or is it part of the modern day hysteria that treats only those who commit sexual offences against children as dangerous. Those who beat children or rape adults are somehow not seen as a risk.

3. If there are child sex offenders in public today that pose such a risk, should they even be out? Surely sentencing should reflect danger to the public and the top priority has to be protection. In an environment when the state is seeking to cut time in prison across the board to save money, surely a better effort would be to ensure sentences of those likely to re offend are sufficiently preventive?

4. Should there not be a bigger debate about what to do with information about convicted criminals? Should everyone have the right to know who has done time for violent, sexual and property offences? Wouldn't you like to check your real estate agent for fraud, your daughter's new boyfriend for violent offences? Or does that put a serious barrier in the way of rehabilitation?

5. Doesn't allowing such checks simply produce a false sense of security? The two boys tortured in Edlington would not have been protected because their assailants were minors too. A significant proportion of child abuse happens in feral homes, committed by people who are never convicted or even charged. Does making such a check become an easy substitute for being cautious, not leaving your children with people you don't know? Indeed shouldn't the best step be to have enough communication between children and parents that when the kids don't like someone, because of what they say or do with them, that parents listen?

This sort of proposal is driven by politicians seeking to get good publicity months out from a general election, a desire to "do something" rather than consider the whole criminal justice framework around protecting children and media hyped hysteria about high profile cases.

A better response is the following:

1. Preventive detention to be used more often for multiple repeat offenders and those who are considered to present, on balance, a real danger to the community. This applies also to minors who are offenders.

2. Applying a sentence of custody denial for anyone convicted of serious violent or sexual offences (including those against children). Intergenerational abuse and criminality is a key problem, and it is about time that parents who abuse are no longer permitted to live in the same home as other children. Why are abusers allowed to breed and raise children, but not allowed to work in schools? Is it less of a concern to make your own victims?

3. Promote self defence techniques for children and the means for them to safely advise trustworthy adults (i.e. at school) if they are frightened or abused.

4. Criminal negligence charges for Police or child protection authorities who ignore multiple reports of offences against children. The Edlington case is a palpable example of this.

5. Permanently deny welfare including housing to all convicted serious violent and sexual offenders. Taxpayers should, at least, not be forced to pay to sustain those who have harmed them. Let them be at the mercy of charities who will spring up to help. Let's not allow them to populate already tragically depressed housing estates and live their lives in leisure in front of TV.

6. Consider how and whether the general public should have access to criminal records of other citizens. Sexual offences are one thing, but so are violent and property offences. Would this make people safer or would it simply result in all criminals being incapable of living lives outside prison without criminality? Would it be a deterrent or would it allow like minded individuals to find each other and collaborate?

It's important to bear in mind that neither the Edlington case, nor the Jamie Bulger case, nor the Huntley case would ever have been prevented by the measures now proposed. Edlington COULD have been prevented by the Police and Child Protection Services, as the offenders had committed multiple violent and property offences over the years.

However governments rarely point the blame at themselves, make themselves accountable personally and financially, and seek radical changes to try to prevent similar occurrences.

Feral youth require focused response

Edlington is now known in the UK as the place where two boys, aged 11 and 10 attacked, brutally tortured and left for dead two other boys aged 9 and 11. The details of the case are beyond that of most violent crimes, but demonstrate sadistic pleasure in inflicting the most horrendous pain, suffering and degradation. Having a sink dropped on your head, wounds cut to the bone and cigarettes burnt into them, with sexual assaults and left for dead. They even used a mobile phone to film their sadistic game.

Those who committed it now have preventive detention for a minimum of five years. The sentence of their victims will be for much much longer.

While many ask "why", it isn't rocket science to figure out. When asked why, one said "Don't know. Cos there was nowt to do."

The two perpetrators are sadistic psychopaths, probably without any hope of redeeming their lives. The criminal justice system should keep them securely incarcerated for many years, until - as the judge said - they no longer pose a risk to others. A children's charity has said a five year minimum is insufficient, as their victims will still be young and fearing their release. It would only be fair to at least keep them away for at least 15 years. Being granted anonymity for life and new identities is rather premature. Why on the one hand are some relatively harmless people put on the sexual offenders' registry, but these two - unreformed - will automatically be given a chance for a new start? On top of that, should not both be required to give some of their future earnings in compensation to the victims?

Whilst they are primarily to blame, the secondary blame goes to the oxygen thieves who are their parents.

The boys drank vodka and lager and smoked cannabis. Their 38 year old unemployed father would beat them and their mother. Both parents let them watch explicit violent horror films from around the age of 6, including the Chucky films. Their older brother has already been locked away for mugging a pensioner.

Their 36 year old mother is a heavy cannabis user, and has had seven children by two fathers. She said of the incident:

"It’s got nowt to do with me – they weren’t even in my care.”

You see only three weeks before the mother got them put into foster care.

So the father should at least be charged for the violence against the boys, for supplying them with intoxicating substances and neglect. The mother is at least an accessory to all that. Both should also be denied welfare and prohibited from having custody of children for at least a decade. It is about time that such grossly reckless and vile parents faced serious criminal sanctions, and taxpayers freed for being forced to pay for them. It is also about time that such people were denied any rights to live with children for the foreseeable future.

Finally, there is substantial blame to be laid at the foot of the Police and the child protection authorities in Doncaster. Nine agencies failed on 31 occasions to take action against the two boys. I would suggest the parents of the two victims seek legal advice about suing them for compensation for their boys.

An 11 year old neighbour kept a diary about how the boys would abuse her and throw stones at her and her family. In 2006 a boy threatened a school staff member with a baseball bat, no further action was taken. There were arson attacks with no follow up. An incident involving ducklings from a public pond thrown sadistically at a wall and killed. With a constant series of incidents, clearly the relevant agencies did not connect them and did not consider them serious.

A week before this latest incident, an 11yo boy was beaten up and kicked. They were meant to appear in front of Police to explain this on the day they chose instead to nearly kill two boys.

It should be beyond doubt that Doncaster council and the local Police have failed miserably to undertake their duties to protect the public. No one has been fired because of this, but it is about time someone was accountable. Given news the parents are now being investigated, it should not be long before someone from the authorities receives a lawsuit - and only when it is a sum commensurate to the years of therapy, and the loss of enjoyment of lifestyle that the two victims will endure in coming years, will it be taken seriously.

Yes intervening in such cases is difficult, but when two children repeatedly commit violent crimes at what point is that still an excuse?

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.