About the only thing he got wrong was his prediction that the financial collapse would be inflationary, but of course he called gold correctly (it was about $300 at the time).
This is Nigel Farage, a UK delegate to the European Parlaiment, saying that all Europe really needs is free trade and some basic standards for regulation, not the whole mess of regulation and loss of sovereignty offered by Brussels today. (I totally agree about free trade, but where do you draw the line with labor and environmental regulation – so many of the EU’s silly laws today are in those spheres – better to just say, “Tarriffs, quotas and bans are hereby abolished within the EU. Fin.”).
It seems as though opinion within every EU nation is turning against the institution. This is good, but also dangerous, as it would be a shame to see Europe return to the mess of trade and travel restrictions that existed a few decades ago. The lack of such restrictions was a great contributor to the flourishing of civilization on that continent in the 19th century, and their reinstitution in the early 20th brought war. “When goods don’t gross borders, armies will.” -Frederic Bastiat
Einhorn has shorted S&P and Moodies. Some take-aways:
Rating agencies are a “public bad,” not a public good.
We need a systemic change to reject the idea of centralized official ratings.
The market would adjust if we didn’t have them.
On Buffett: “He still made a very nice investment for himself.”
“The brands are ruined.”
The companies may lose their equity in (much-deserved) lawsuits.
Margins during boom reflected compromised objectivity, competing for market share.
Without official ratings the market would adjust to risks itself. Official ratings create an arbitrage opportunity: real credit risk is often higher than ratings imply (look at BP: downgraded by just “1/2 notch or something like that.” Ratings allow sharpies to front-run downgrades or prepare to take advantage of depressed prices following downgrades.
Agencies add little value. Market spreads are a much better indicator of risk.
The bulls cheered when the Department of Commerce told us GDP was 3.5%, but then the estimate was quietly lowered to 2.8%, and now we hear that 2.2% is a more like it. In reality of course, when you take away government expenditures, which should not be in GDP anyway as they are not Production, the economy continued to shrink. What else would you believe given that credit is still rapidly contracting and government is throwing sand into any market mechanisms that would clear away the bad debt?
Video link from Lewrockwell.com
Here’s an excerpt from The Law, by Frederic Bastiat, a French classical liberal (today we would say libertarian) economist:
A Fatal Tendency of Mankind
Self-preservation and self-development are common aspirations among all people. And if everyone enjoyed the unrestricted use of his faculties and the free disposition of the fruits of his labor, social progress would be ceaseless, uninterrupted, and unfailing.
But there is also another tendency that is common among people. When they can, they wish to live and prosper at the expense of others. This is no rash accusation. Nor does it come from a gloomy and uncharitable spirit. The annals of history bear witness to the truth of it: the incessant wars, mass migrations, religious persecutions, universal slavery, dishonesty in commerce, and monopolies. This fatal desire has its origin in the very nature of man — in that primitive, universal, and insuppressible instinct that impels him to satisfy his desires with the least possible pain.
Got this from Zero Hedge, an excellent new blog.
The debt must be written down.
Ancient Babylon had better economic models than our Nobel laureates.
Our politicians’ constituents are not the voters, but the bankers, who are parasites.
Obama’s economic team is the same crew that raped Russia in the ’90s and they will support an oligarchy in the US as well.
Mises Foundation founder Lew Rockwell interviewed blogger Mike “Mish” Shedlock on his podcast series:
Topics include bailouts, ‘stimulus’ plans, the benefits of deflation, and Mish’s campaigns to end bailouts and abolish the Fed.
Mish is really pushing hard politically. I’m 100% behind him, but I worry a bit about how the gangsters might respond to him now that he is getting so popular.
Also check out Lew Rockwell’s podcast archives and look for Jim Rogers’ interview yesterday.
PS — Sorry again for the lack of posts. I’ve been a bit unsettled of late, having been in the middle of a transoceanic move.
The market has been severely hamstrung for decades, and now that it is fainting from loss of blood, its vampire captors point to it and say, “see, markets need to be restrained or else they fail.”
I won’t actually comment on Krugman, other than to say that he is a socialist, and like many of his breed who do not actually implement collectivist scams (as opposed to Raines, Paulson, Mozillo, Congress, et al.) but provide intellectual support for them, he seems to have a soul, albeit a lost one.
Anyone who understands the principles of the market and defends them in public these days must feel the way I do: that we are simply narrating the decline. You can’t argue with history. You can just put it down as you see it, now in the hope of carrying a few embers of common sense through or out of the West as it enters some kind of dark age.
It is astounding that after recently observing Hitler, Stalin, Mussolini, Mao, Peron, Castro, Chavez and a hundred other tin-pot dictators destroy or hobble their nations through various forms of collectivism, the entire West is now leaping headlong in that same direction, with hardly a second thought. No credit is given to the principles of individualism, private property and freedom of contract, nor the great market economy that created the prosperity these societies are so eager to squander. The market has been hamstrung for years, and now that it is fainting from loss of blood, its vampire captors point to it and say, “see, markets need to be restrained or else they fail.”
This episode will play out over generations, and it will end with tens of millions dead and the end of the very civilization that codified respect for the individual.
The end of the Enlightenment means the end of freedom and the end of freedom means the end of centuries of increasing living standards, from food and health care, to travel and communication, to privacy and personal security.
The West is simply finished. It’s best hope is balkanization, in case any regional pockets of common sense remain, though I can’t think of any that are physically and culturally strong enough to withstand the violence to come. Perhaps Switzerland, for a while.