European Union peace prize?

Oh how I laughed, so much, when I read that news.

Whilst I understand why the Nobel Committee gave the EU the Nobel Peace Prize, it is, quite simply, wrong.

The peace in Europe since 1945 was due to the following:

-  The complete unconditional defeat of Nazi Germany by the US, UK and USSR (with a little help from partisan resistance groups);

-  NATO (and France outside NATO). Keeping the USSR and the Warsaw Pact at bay, especially after the Berlin airlift;

-  The economic integration of Western Europe since 1945 facilitated by the USA through the Marshall Plan, followed by the forerunners of the EU and the GATT/WTO.

There would have been no EU without the unconditional defeat of Nazi Germany, or rather no peace unless you would have counted a unified Europe under Hitler.  

There would have been no EU without NATO deterring the eastward roll of the Red Army by Stalin, using strategic and tactical nuclear weapons.  There would have been no peace either.

There would have been no EU without the commitment of West Germany's post-war leaders to economic reconstruction, a business friendly environment, and to face up to what happened.   To that end, for Greek protestors to fly swastikas because they don't like being told their government might want to keep spending within limits of what it raises in revenue, are dead wrong.

There would have been no EU without the United States providing the aid, providing the foundations of NATO, providing the bulk of the nuclear deterrent, providing support for the GATT (now WTO) to force open global markets in manufactured goods (the core of the Western European economy in the 50s and 60s).

Yes, the EU has helped bind former warring states together, it has also enabled there to be some recognition of mutual values  (however flawed they are in interpretation and application), of free speech, freedom of religion, belief in open liberal democracy, belief in the separation of powers (judiciary, executive, legislature and police), and a broad acceptance of liberal values that reject state racism and sexism, but overwhelmingly are opposed to authoritarian rule.  Yes, there are many ways that is flawed and inconsistent, but compare it to Asia, the Middle East, Africa and Latin America.  Compare it to half of Europe before 1989.

But as the Saturday Daily Telegraph said, it has hardly got a glowing record when faced with major threats to peace and security.

The Nobel committee’s citation explicitly referred to its work in Yugoslavia. Yet Europe largely wrung its hands on the sidelines, until the US ended the bloodshed and forced a peace, as it later did in Kosovo. More recently, in Libya, it was Britain and France, not Brussels and Baroness Ashton, who acted as liberators – again with America’s support.

The EU did not bring down the Berlin Wall, the people of east Germany did after Gorbachev made it clear the USSR would not support east Germany continuing to oppress its people, and east Germans had spent decades watching West German TV and listening to radio from West Germany, the UK and the US.

In Yugoslavia it took US military action against Serbia for the genocide to cease and for Milosevic to stop "ethnic cleansing" of Bosnia, parts of Croatia and Kosovo.  However, it is important to note that one reason many Europeans, in continental Europe, support the EU, is because they have relatives who in living memory endured occupation by the Nazis, or lived under fascism of one kind or another, and have been sold the idea that the EU has stopped all that.  Conveniently, of course, whitewashing out the key role the United States has played, in money and lives, in keeping half of Europe relatively free and staying steadfast to allow almost all of the rest to be relatively free now.

On economics, the liberating movement of the EEC/EU in bringing down barriers among members have been somewhat matched by new barriers with the outside world.  The Common Agricultural Policy, essentially a scam that enabled France's antiquarian farming sector, propped up by grotesquely generous subsidies to pacify (and avoid a perceived fear of Marxist revolution in the countryside), to survive thanks to German, British and Dutch taxpayers, meanwhile dumping subsidised produce on the rest of the world, shutting out efficient producers beyond quotas and tariffs and contributing to environmental degradation and higher food prices in Europe.  The EU maintains massive programmes of vanity projects, like Galileo to replicate GPS and more recently efforts to replicate US, Japanese and European state programmes for earth observation satellites.  It dares demand austerity in the Eurozone whilst seeking annual increases in its own budget beyond inflation.   It's own politicians and senior officials, partly hand picked by national politicians engaging in patronage, enjoy lavish lifestyles travelling in luxury, feeling self important, whilst being ever so distant from those who pay for them.

Now it is printing money, demanding some Member States eviscerate their own private sectors with tax rises whilst trimming their public sectors with spending cuts, stating that the Euro -which should simply be a currency - is not an economic project, but a political one.  

I'll let the Telegraph editorial finish my thoughts on this:

Yes, Europe has been transformed over the past half-century – in the committee’s words – from a continent of war to a continent of peace. But that came about largely through the establishment of trade links, the free movement of people, the knitting together of an economic union rather than a cultural one. The irony of yesterday’s announcement is that the single gravest danger to that peace – provoking riots in Spain, demonstrations in Italy, the rise of far-Right movements in Greece – is arguably the European project itself, as it exhausts the Continent’s treasuries to prop up a crumbling currency union. 

The good news is that there is still time for Europe to pull itself out of this grim spiral, to rediscover and reaffirm the shared freedom and shared prosperity that made it such a beacon to the impoverished or imprisoned nations on its borders. If it can do that, it might even deserve such a prize. As it stands, this bauble feels more like a decoration for the headstone of a once noble ideal.

I would say the EU doesn't deserve it, but then given how debased the Nobel Peace Prize is (and has been for decades), then I wouldn't really wish it on anyone unless I was wanting to mock them.  It has become a caricature of what it is meant to stand for.

What's only funnier is the EU-crats, politicians and their lackeys thinking how very deserving they are for their great efforts.  Yet if it continues to be a barrier to prosperity in Europe, if it continues to expound the socialist view that the successful striving saving nations should pay for the deficit ridden corrupt and spendthrift ones, the only thing keeping the EU together is the good will, of Germans, who don't want to be thought of as being like the Nazis.   Right now, they are willing to let a lot of their taxes and some of their savings, be taken for their reputation.  How long that continues, depends on how many of them remain in jobs, remain immune from inflation and turn a blind eye to being called Nazis despite their hard work and generosity.

It is the USA, NATO and West German/reunifed German political leaders that have produced a legacy of peace.  It is the EU that arrogantly presumes that this legacy is immutable.

What went wrong with Greece

Aristides Hatzis is Associate Professor of Philosophy of Law & Theory of Institutions at the University of Athens, Department of Philosophy & History of Science.

He has some firm views of what went wrong in Greece, and it is not a view that fits the conspiracy theories of the Syriza party or the empty claims that Greece is a victim of financiers.

Hatzis says Greece joined the then EC (now EU) in relatively good economic health:

Seven years after embracing constitutional democracy the nine (then) members of the European Community (EC) accepted Greece as its tenth member (even before Spain and Portugal). Why? It was mostly a political decision but it was also based on decades of economic growth, despite all the setbacks and obstacles. When Greece entered the EC, the country’s public debt stood at 28 percent of GDP; the budget deficit was less than 3 percent of GDP; and the unemployment rate was 2–3 percent. But that was not the end of the story.

Greek voters voted to the left, and that changed everything:

Greece became a member of the European Community on January 1, 1981. Ten months later (October 18, 1981) the socialist party of Andreas Papandreou (PASOK) came to power with a radical statist and populist agenda, which included exiting the European Community. Of course nobody was so stupid as to fulfill such a promise. Greece, with PASOK in power, stayed in the EC but managed to change Greece’s political and economic climate in only a few years.

He continues to explain that PASOK changed the relationship between the state and the people, but even the so-called "rightwing" opposition did nothing to change that.  Recognise that pattern in other countries?

Today’s crisis in Greece is mainly the result of PASOK’s short- sighted policies, in two important respects:

(a) PASOK’s economic policies were catastrophic; they created a deadly mix of a bloated and inefficient welfare state with stifling intervention and overregulation of the private sector. (b) The political legacy of PASOK was even more devastating in the long-term, since its political success transformed Greece’s conservative party (“New Democracy”) into a poor photocopy of PASOK. From 1981 to 2009 both parties mainly offered welfare populism, cronyism, statism, nepotism, protectionism, and paternalism. And so they remain. Today’s result is the outcome of a disastrous competition between the parties to offer patronage, welfare populism, and predatory statism to their constituencies.

It wasn't as if the political classes didn't know there needed to be reforms either, but the bare minimum was done to reach a magic goal - joining the EURO.  So how did Greece expand spending on such a grand scale?  It wasn't from taxation, because tax evasion was rampant and tax collection very inefficient, but borrowing.  

He calls it  "party time":

The borrowing became much easier and cheaper after Greece 2adopted the Euro in 2002. After 2002, Greece enjoyed a long boom based on cheap and plentiful credit, because the bond markets no longer worried about high inflation or a devalued currency, which allowed it to finance large current-account deficits. That led to a crippling €350 billion public debt (half of it to foreign banks) but, more importantly, also to a negative effect that is rarely discussed:The transfers from the EU and the borrowed money went directly to finance consumption, not to saving, investment, infrastructure, modernization, or institutional development. The Greek “party time” with the money of others lasted 30 years and—I must admit it—we really enjoyed it! Average per capita income reached $31,700 in 2008, the twenty-fifth high- est in the world, higher than Italy and Spain, and 95 percent of the EU average. Private spending was 12 percent more than the European average, giving Greece the twenty-second highest hu- man development and quality of life indices in the world. 

Yes, most of the borrowing the Greek government undertook was not to build infrastructure (except for some very high profile totemic projects like the Olympics, a metro, tram lines and a new airport), nor to finance productivity improvements, but to consume.

People lied and evaded tax, but this culture was endemic.  Remember this isn't an outsider, but a Greek academic noting this:

Lying became a way of life in Greece. Still, one might argue that lying to protect what one has created is justified. But in Greece that wealth was not created, but simply borrowed. In 1980 public debt was 28 percent of GDP, but by 1990 it had reached 89 percent and in early 2010 it was more than 140 percent. The budget deficit went from less than 3 percent in 1980 to 15 percent in 2010. Government spending in 1980 was only 29 percent of GDP; thirty years later (2009) it had reached 53.1 percent. Those figures were hidden by the Greek government as late as 2010 when it admitted that it had not actually met the qualifying standard to join the Eurozone at all. The Greek government had even hired Wall Street firms, most notably Goldman Sachs, to help them fudge the numbers and deceive lenders.

Yet for entrepreneurial activity, Greece became a disaster. In 2012 it was ranked 100th out of 183 countries for ease of doing business, being the worst in the EU and the OECD and below Columbia, Rwanda, Vietnam, Zambia and Kazakhstan.  It ranked 154th for laws protecting investors and 147th for ease of employment.  The best ranking was 43rd, for closing a business.  One study indicated that 25% of Greece's GDP was "informal" or outside the law, and petty corruption cost €800 million in 2009.  42% of the state budget is on welfare benefits of some kind.  Pensions were ridiculously generous.  35 years working in the state sector allowed a man to retire at 58 on a pension.  

The "free" public health system actually saw 45% of total health spending coming informally directly from users bribing staff to do their jobs.

Greece is now facing some reality.  It is still borrowing, but this time from taxpayers in Germany in effect.  It is still overspending, but is set to break even in three years.

However, the Greek disease has been socialism, with parties outdoing each other to spend borrowed money to buy votes and evade economic reality.  Greece's economy has had to shrink, because it has been built on credit - not production.  The hard awful reality is that those who benefited from it, never have to pay it back, whereas the up and coming generation face paying for it.

Greece has had its economy destroyed not because of bankers, but because it was rotten at the core, sustained by socialist politicians and those whose support they gleaned by their bribery using borrowed money.   Since the early 1980s, more and more of the economy was built on nothing at all - sadly today, it isn't the public sector facing retrenchment and pain, but the private sector.   Increasing taxes and increasing tax collection is gutting the part of Greece's economy that is productive, and precious little is being done to gut the part that isn't/

France's road to disaster courtesy of Hollande

Detlev Schlichter on France:

In 2012, President Hollande has not reduced state spending at all but raised taxes. For 2013 he proposed an ‘austerity’ budget that would cut the deficit by €30 billion, of which €10 billion would come from spending cuts and €20 billion would be generated in extra income through higher taxes on corporations and on high income earners. The top tax rate will rise from 41% to 45%, and those that earn more than €1 million a year will be subject to a new 75% marginal tax rate. With all these market-crippling measures France will still run a budget deficit and will have to borrow more from the bond market to fund its outsized state spending programs, which still account for 56% of registered GDP.

If you ask me, the market is not bearish enough on France. This version of socialism will not work, just as no other version of socialism has ever worked. But when it fails, it will be blamed on ‘austerity’ and the euro, not on socialism.

As usual, the international commentariat does not ‘get it’. Political analysts are profoundly uninterested in the difference between reducing spending and increasing taxes, it is all just ‘austerity’ to them, and, to make it worse, allegedly enforced by the Germans. The Daily Telegraph’s Ambrose Evans-Pritchard labels ‘austerity’ ‘1930s policies imposed by Germany’, which is of dubious historical and economic accuracy but suitable, I guess, to make a political point.

Most commentators are all too happy to cite the alleged negative effect of ‘austerity’ on GDP, ignoring that in a heavily state-run economy like France’s, official GDP says as little about the public’s material wellbeing as does a rallying equity market in an economy fuelled by unlimited QE. If the government spent money on hiring people to sweep the streets with toothbrushes this, too, would boost GDP and could thus be labelled economic progress.

Sick jokes are a crime in the UK

Today, the Home Secretary, Theresa May, spoke at the Conservative Party conference and said:

Do we want to see the internet become an unpoliced space? No. Do we want to see terrorists, criminals and paedophiles get away scot-free? No. We are the Conservative Party, not the Libertarian Party. As Conservatives, we believe the first duty of government is to protect the public. That is why the Conservative Party will always be the party of law and order.

She's right of course.  Law and order is about protecting people's freedoms, but she mentioned the word "freedom" once by saying We need to give the police the freedom to use their judgement.

Yes, well if you want the difference between conservatives and libertarians then this case is one of them.

Matthew Woods is a rather vile young man.  He posted a joke that the Police deemed to be grossly offensive, on the website Sickipedia.  The joke was about April Jones, the 5 year old girl who went missing 11 days, and now presumed murdered.  I don't care what the joke was, because it is likely to be grossly offensive to me.  However, that's not the point.

The Guardian reported:

He pleaded guilty at Chorley magistrates court to sending by means of a public electronic communications network a message or other matter that is grossly offensive. The chairman of the bench, Bill Hudson, said Woods's comments were so "abhorrent" he deserved the longest sentence the court could hand down.

He is getting 12 weeks in prison.  

Is this really a matter for the criminal law?  Would he have faced a conviction if he had simply said it to another person?  How about if he wrote it on a piece of paper?  If not, why is an electronic communication so bad that it is time to be precious about vile jokes?

The Guardian also notes there is a long list of similar cases:

- A 56 day sentence for a racist comment about a footballer who collapsed;

- A community order for saying "all soldiers should die and go to hell" on Facebook;

- A teenager visited by the Police for being disgustingly rude to Olympic diver Tom Daley on Twitter;

- A man convicted (later quashed) for jokingly saying on Twitter that he'd blow up Doncaster/Sheffield Airport if it closed for the snow.

Now the last case probably justified a query, given fear of terrorism, but the rest?  Has British society become so precious that people who offend others deserve a criminal record?  Or is there genuine fear that if there isn't a criminal law against it, that people will throw ever more disgusting insults around in a snowball of nihilism and vileness?  If so, is the right response to offensive speech not simply to insult the person saying it, or to ignore it?

As John Kampfer in the Guardian said:

Direct incitement to violence is one thing. But we cannot and should not sentence people for bad jokes, poor taste and terrible manners. That is an issue for parents, teachers and, most importantly, peer groups.

Quite.

Most people in their lives will encounter bores, bullies and a range of rude pricks who will call you names, who will be offensive to you and seek to upset you.  It isn't a crime to insult someone, except it is, now.

I don't blame the Conservatives any more than the other parties.  Labour introduced this law, and both the Liberal Democrats and Conservatives have happily let it be.  However it is wrong.

Free speech is for those who offend as well as those who inspire.  The state should not be policing what offends people, for when will it stop?  Will you be able to call the Police if someone calls you a name?  Will books and songs be banned for offending Christians or Muslims?  Will politicians get people arrested for calling them lying corrupt pricks?

I don't doubt that the latest example of using this law is about someone who has been vile, but then comedian Frankie Boyle is vile, the lowlifes who sell t-shirts to celebrate dancing on Margaret Thatcher's grave are vile, but I don't want the state arresting them.  I don't want the state arresting me because I blaspheme against Islam, or call Russel Norman a prick, or call Sue Kedgley a hysterical control freak, etc etc.

It is time to speak up for free speech, including the free speech of that which offends, for no one should have a conviction because they said or wrote something that upset someone else.

UPDATE:  Peter Cresswell has written about people getting offended by what some politicians say.  He uses a quote I nearly used, which is Stephen Fry's about people thinking that when they are offended, they gain some sort of new right to "something".  No you don't.

Russel Norman says "fuck the poor" with his economic illiteracy UPDATED

It's a shame really, you can rely on Russel Norman to engage in reality evasion, but his latest attempt to introduce monetary policy into the Green Party's repertoire is laughable. 

It's a big "fuck you" to people on low to middle incomes with savings, because he wants to devalue the New Zealand dollar.  Not because there is a major flight in capital from NZ$ holdings, but because he thinks the NZ$ in overvalued.

Russel Norman knows that the money you hold should be worth less.

Not you, not the millions of people who buy and sell NZ$ and in NZ$ every day, but Russel Norman and the Green Party.

He wants the Reserve Bank to print money to devalue the dollars you have in your wallet or bank account.  

It means that the vast bulk of New Zealanders, especially those on low to middle incomes, with small savings, will have part of their own money TAKEN by stealth by the state.  

They know what it means.  It means an overseas holiday is a lot less affordable.  It means a new laptop, car, books, clothes, TV, mobile phone all become more expensive.  

It means petrol goes up, but the Greens kind of like that, as you should be driving less says transport spokesperson Julie-Anne Genter.  Of course it puts up the price of moving freight as well, and flying domestically.

However, whilst devaluation increases the price of imports, the way Russel wants to do it will increase prices across the board.

It is a recipe for more inflation.  

Yet he wants to increase the availability of credit by reducing interest rates, meaning businesses and consumers can borrow more, and so promoting more demand (after all this is what QE does) so hiking up inflation more and more.

You see, the standard response to inflation of the Reserve Bank is to increase interest rates, but Russel Norman would reduce interest rates.

He wants "new tools for managing asset bubbles", yet would be pouring petrol on property bubbles by allowing loose credit and allowing people to borrow more.

His claim is that this will help the productive sector, because exporters will suddenly get a boost because they will be able to undercut foreign competitors.  This is true, on the face of it.  Devaluations do that, but they also increase the price of inputs into production.  Fuel being the obvious one.  Tourism would become cheaper, for foreigners visiting New Zealand.  However, Air NZ wouldn't be able to take advantage of as much of that as its competitors as two of its biggest long run costs - fuel and the capital cost of aircraft, would rise.  

Yet, Norman ignores the consequences of his approach to devaluation, which would be to generate inflation.  With domestic costs soaring, exporters would find their competitiveness would be entirely wasted as they couldn't spend their renewed returns quickly enough to offset inflation, they couldn't save them (with interest rates on savings below inflation - as they are in the UK, US and Japan today) and would be less and less able to afford imports.

His ignorance is breathtaking.  He says that printing money so that the government can engage in..

"Buying Christchurch earthquake recovery bonds will reduce the need for the Government to borrow offshore. Currently, about 60 percent of all Government borrowing is from offshore.

"Buying overseas assets to restore the EQC's Natural Disaster Fund will prepare us better for any future natural disasters."

So he will print money, for the government to borrow from the Reserve Bank, creating inflation, saving the government from borrowing from those with actual money, by debasing the savings of NZers.  Then, having devalued the NZ$ he proposes using it to buy assets from overseas which will suddenly cost more.

He claims that the UK, US, Japan and the European Union (presumably he means the European Central Bank, as there are 11 currencies in the European Union) engaged in quantitative easing (money printing) to boost their export sectors, which is utter nonsense.  It has been an exercise in trying to stimulate demand in stagnant economies.  After 15 years, Japan remains stagnant, whereas the US has small hiccups of demand that quickly subside.  However, in all these cases the effect has not been to substantially devalue currencies relative to major trading partners (nor was it designed to).

He thinks that the NZ$ has a high value because of speculators, yet he himself wants to speculate with the money held by every New Zealander, by debasing it.

The average New Zealander isn't as ignorant as Russel, because they know that when the NZ$ drops, they lose, unless they have earnings in foreign currencies (which few do).

So the losers are the poor and middle income New Zealanders.  They can't readily open foreign currency bank accounts, buy foreign shares or equities and rescue their savings from the thieving politicians and central bankers out to take it from them.

The rich will bail out of Russel Norman's vision for the NZ$.  They can afford to. 

The poor would have to swallow it.   Give up on the overseas trip.  Give up on buying a laptop or a kindle.  Watch while their savings earn nothing in the bank, and lose value in real terms - just like they did when Post Office accounts offered 2% when inflation was 12% under Rob Muldoon.   

Of course foreigners buying New Zealand made goods and services would do well, because the products would be cheaper.  In fact, a holiday to New Zealand would be so much cheaper.   However, they aren't exactly poor now are they?

The Green vision for monetary policy is simple:

- Take money from NZers' savings through devaluation (who pay more for imports from everywhere) - transfer it to foreigners buying NZ goods and services (who pay less for imports from NZ) and NZers who make money from foreigners buying NZ goods and services using foreign currencies.

- Take money from NZers who are savers and transfer to those who are borrowers (through low interest rates).

- Fuel a new property bubble as NZers use cheap credit to enter the property market as a hedge against inflation, and fuel a new sharemarket bubble as the same happens (fleeing savings accounts as a hedge against inflation, and foreigners buy NZ shares because they are cheap).

- Fuel hyperinflation, as the debased currency puts up import prices and the flood of cheap credit overheats demand.

The people who are hurt the most from devaluation and inflation are the poor.  More money printing will make it worse.   This inflationary spiral can only end by:

- Hiking interest rates as happened in the late 1980s, effectively reversing the "gains" for exporters and businesses by pushing their borrowing costs through the roof, sending thousands bankrupt and bursting the property bubble;

- Banning inflation, Muldoon style, creating shortages - (former) east Germany style

- Abandoning the NZ$.

In all of those scenarios, the people who lose the most are those who are least able to leave the country or shift their savings elsewhere.

Hyperinflation, debasement of savings, makes the Green Party's claim to give a damn about poverty almost laughable.

UPDATED:  Of course The Standard embraces it, tribal like, because they see money printing as some sort of anti "neo-liberalism" project.  (yes, anyone opposing the left just want to eat the poor).  The intellectualism in this post is astonishing "I look forward to John Key, when he gets back from fellating Mickey Mouse" showing how asinine the debate is.

The status quo in the Western world, including all US Administrations since Reagan and UK since Thatcher, has been Milton Friedman's monetarism.  That is to progressively increase the money supply regulated by interest rates set by a state central bank to manage inflation.

Hayek opposed this, Rand opposed this, Murray Rothbard opposed this. Alan Greenspan once did, and then embraced Friedman's view. Detlev Schlichter opposes it now.

A fundamental cause of the global financial crisis is the continual state issuing of new credit and new money, so that it isn't savings being reinvested, but money created from..... nothing.

Monetarism, as it is called, attempts to manage the inevitable inflation arising from this (lowering the value of the medium of exchange by producing more of it inevitably means prices rise), but ignores asset price inflation.  The property and sharemarket bubbles caused by malinvestment are ignored.

It has failed.

QE has been the Keynesian response in Japan, the US, the UK and the Eurozone.  The mass destruction of value due to these bubbles popping has been filled by massive money printing, yet it has not resulted in a sustained kickstart to demand for simple reasons.  One is that the banks, which were the conduit of the cheap credit, have been told to increase reserves, so are filling up their reserves with freshly created cash and banks have also tightened up credit enormously, because they were told to not undertake anymore bad lending.  The other is that there is a lack of confidence in the economic fundamentals.   It is why gold prices have soared, as a safe haven.

It wasn't undertaken to improve export competitiveness.  It has demonstrably failed to boost Japan's economy.  It has created minor blips in the US economy, and nothing more.

For the Standard to say that having a consistently high dollar is about speculators making money from New Zealand is demonstrable ignorance.  To think that, say cutting the value of the NZ$ by 25%, is good for the working poor (when it will raise prices of petrol, electrical goods, overseas holidays and any imported books, clothes), is bizarre.

However, socialists have long thought thieving from the mass of the population through debasing the currency was an easy path to spending more money on what they think is good for them.  Easier to implement than a straight out tax, and easier for all of the elite to evade, by shifting their own savings away from the debased currency, leaving the average people robbed.