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December 17, 2009
This is my comment article published in The Boar of week 10 Term 1 2009.
In week 8 at the politics society question time I was asked if there was a risk of too much regulation of the financial sector. My answer: yes. The audience laughed. I was the libertarian representative. I was not going to say “the government must regulate things”. That would have been unlibertarian. I have to admit that I was positively surprised by the laughter. It is better than being booed. I then tried to explain what were the causes of the financial crisis in one minute, I doubt many people understood the argument.
The blame for the financial crisis lies with the government. It is not a failure of the “free” market. Let us first look at the causes of the subprime lending crisis and then look at more fundamental aspects of “capitalism” (as it is currently understood, rather than what libertarians argue it should be).
In 1938 and 1970 the US Federal government charted Fannie Mae and Freddie Mac. They were privately owned but the government pledged to help them pay back their debts. The idea behind the creation of these two institutions was to help families who could not easily get a mortgage to get one. By 2000 they had 50% of mortgage they purchased had to go to borrowers below the median of their area. And 20% of the mortgages they purchased had to be “special affordable loans” aka subprime loans). This allowed the government to increase home-ownership amongst poor people (always a politically popular thing to do) without, in the short run, having to pay for it.
Since this was basically a political free lunch (increase home ownership without increasing taxes or making cuts elsewhere) they decided to do something similar with entirely private institutions. The Communities Reinvestment Act (CRA) was passed by Congress, it pushed private institutions to lend to people who would otherwise be not credit worthy enough to get a mortgage. They were not forced to comply however a high level of CRA compliance was required to do things likes establishing new branches and getting approval for mergers and acquisitions.
The result of all these policies: too many subprime loans who will eventually default and cause a crash. However this is not looking at it fundamentally enough. There is another aspect of modern finance (which is practised internationally) which is due to government intervention and which is wrong. It is called fractional-reserve banking. Under that system the bank only holds a fraction of its deposits in reserve (the rest is loaned or invested in shares or equities). Suppose a bank is only required to keep 10% of reserve deposits. If you put £100 in that bank it will be able to lend up to £900. Basically £900 is created out of nowhere. The bank then lends this money to other people and gets interest from it (effectively they are getting paid for doing nothing productive at all). Contrast that situation with full reserve banking where all of the deposits have to be kept as reserve (the bank will still be able to lend money from the money it has in fixed term accounts).
The problem with fractional reserve banking is not if a certain (not necessarily significant) proportion of its clients wants to get their money out the bank has a problem. The solution is to use the printing machine of the central bank (the central bank since it is backed by the State and its law making power does not have much a problem). This is not cost free, it creates more inflation and thus reduces the purchasing power of everyone (a sort of invisible tax on al of us). My point is: if it was not for the backing of the State banks would not engage in fractional-reserve banking.
With fractional-reserve banking the interest rates are lower (since there is more money to lend) than with full-reserve banking. This means that some of it is invested in poor investments (for example subprime mortgages). Eventually they will default and that will cause a chain reaction leading to a credit crunch. If I have not bored you to death have a look at “The case against the FED” by Murray Rothbard (it is available for free online).
There is another creation of the State which is bad and which most people commonly think of as part of “capitalism”. It is called a limited liability company. The first thing to note is that a company is not an association of persons. It is a person in itself. Why? Because Parliament has said so. It has all the rights of a natural person (even human rights) but not necessarily all the responsibilities (you can't lock up a company for murder). But that's not my main concern. My concern is a particular type of company called a limited liability company. If the company goes bankrupt the liability of the shareholders for any debt which has not been paid back from selling the company's assets is limited to the face value of their share (which is an arbitrary amount decided when the company is incorporated). To illustrate the situation better consider the following example: if I am a sole trader and I mess up I am personally liable for all the debts of the business but if incorporate a company and say it has a capital of £1000 and it goes bankrupt I only lose £1000. It is unfair and artificial. For an even more artificial example look up the case Salomon v Salomon. Basically the loss of the shareholders is limited but what they stand to gain is unlimited. This leads to an asymmetry of risk which leads the company to engage in very risky activities. I believe that it is another cause of the financial crisis.
What needs to be done is to remove all forms of government interference in the market, including fractional-reserve banking and limited liability.
October 07, 2009
Writing about web page http://theboar.org/comment/2009/oct/5/illusion-freedom/
This is my article as published in the Boar of week 1 term 1 2009.
Two weeks ago Rowan Laxton, the head of the South Asia desk at the FCO, was found guilty of racially aggravated harassment. He was in a London gym watching a television report about the death of a farmer killed by Israeli bombs during the Gaza conflict when he exclaimed: “Fucking Israelis, fucking Jews.” It is also alleged that he said “If I had my way, the fucking international community should be sent in and if the Israelis got in the way, they’d be blown off the fucking earth.”
What he did was inappropriate and this is aggravated by the fact he is a diplomat. One would hope that Her Majesty’s representatives be able to express themselves in a more diplomatic manner. He should resign.
What Mr Laxton said is of absolutely no use to the debate about what Israel did in Gaza and it was not meant to be. As the judge said “it was an emotional reaction”.
He was convicted under the Criminal and Disorder Act 1998, one of the many Acts passed by New Labour relating to criminal justice. Here is how the Home Office summarises the law: “A crime will count as “racially aggravated” if it can be shown that it was motivated either wholly or partly by racism. A crime will also count as “racially aggravated” if it can be shown that – even though the motivation for the attack was not racist – racist hostility was demonstrated during the course of the offence or immediately before or after it.” A “racial group” is, for the purposes of the new offences, “a group of persons defined by reference to race, colour, nationality (including citizenship) or ethnic or national origins”. The Act does not cover religion but it “makes it clear that even where there is a religious element to a crime, so long as some part of the motivation is racial, the offence will count as a racially aggravated offence.” So shouting “fucking French” at me (I am French) even if your motivation is not “racist” (saying that French is a race would cause an outcry in France) counts as racially aggravated.
If your racially aggravated action happens to be considered harassment or “putting people in fear of violence” within the meaning of the Protection of Harassment Act 1997 (a New Labour law which has very often been used against peaceful protesters) then you would be, like Mr Laxton, guilty of “racially aggravated harassment”. In any event should the reasons why someone does something be relevant in convicting him?
I mentioned above that religious hatred was not covered by the Act. This is now the case thanks to Racial and Religious Hatred Act 2006. That act goes even further than the previous laws by its references to “threatening” words, behaviour, written material and public performance of a play.
In any event these laws will not defeat racism: the law cannot control what people think. They could even be counter productive.
These new laws reflect a very worrying development, the creation of a right not to be offended. This of course goes against free speech, which after all means not the right to express views you agree with but also views you wholeheartedly disagree with. It is essential that in a democratic society one should be able to offend.
It’s interesting to note the contrast between what happened with Mr Laxton and what happened in Sweden recently. A tabloid newspaper published an article claiming that Israeli soldiers had harvested the organs of some Palestinians whom they had shot. Within hours, Israel’s deputy foreign minister had denounced the article for racism and demanded that it be condemned by the Swedish government. However the Swedish foreign minster wrote on his blog that Israel wanted the Swedish government to distance itself from the article or take steps to prevent a replication, but that was not how the country worked. “Freedom of expression and press freedom are very strong in our constitution by tradition. And that strong protection has served our democracy and our country well”, he wrote. This robust defence of freedom of expression was endorsed by the prime minister.
It seems Britain is no longer the land of liberty it used to be.
February 18, 2009
If you don't care do not bother reading.
My killer question is what is your stance on No Platform, a candidate supporting it will not be on the list of people I am voting for (I might even R.O.N them if I am in a bad mood).
A candidate who says he wants to leave the NUS will be viewed in a positive way.
Other positive things in a candidate:
- not being politically correct
- being libertarian
- believing in the right to property (at least as far as the fruits of one's labour)
So here is my provisional list (nor particular order). If you are not the list, don't be offended, I still love you (unless I did not love you in the first place).
President: Sam or Andrew or Asen
Education: R.O.N if I I am in a bad mood
Communications: Andrew Horder or Issac Newton (depends of their stance on NP)
GFO: Andy Perkins
Welfare: Fran or Sami
Sports: I honestly don't know and I can't be asked to ask each of the candidates for their stance on NP. So it will be Laura or Nicola (because they are girls, yes I know it is a bad reason for voting for someone)
Societies: OJ or James.
Now for the part-time people
Student sport: Sonny Kombo
Democracy Committee: don't know
Executive Committee chair: Chris
Societies Comm: Giles
Anti racism: Sam
If any of the candidates I listed is pro NP please let me know.
February 16, 2009
I really should be doing some work but I am not.
If we assume that facebook is everything (not an unreasonable assumption) then it can accurately predict the election results.
So here are the number of people in the fb groups of the candidates for President (and the number of people invited) at around 16:15 on Monday week 7 (day 1).
- Mitchell Fung: 215, 1614
- Andrew Bradley: 147, 859
- Sam Shirley: 106, 876
- Asen Geshakov: 70, 206
- Andy Glyde: 58, 441
By far Mitchell is the big winner.
I can't be asked to do it for the other positions.
UPDATE: previously I did not find Bradley's group. This has now been corrected.
February 11, 2009
I just had an idea for the British Constitution. We should do the following:
- HM should preside over cabinet meetings
- Each government departement should be presided by a permanent secretary who will sit in the cabinet (there will be no politicians in the cabinet).
- Permanent secretaries should be career civil servants appointed on merit.
- The right of all hereditary peers to sit in the House of Lords should be restored.
- "Working peers" should be abolished.
- All the new peerages should be life peerages appointed based on merit.
- The House of Commons should not change (although something should be done to weaken the power of the whips)
- HM may in some circumstances refuse to give assent to some bils (especially if the Parliament Act was used).
- The senior judiciary should have the power to strike down legislations repugnant to fundamental common law principles.
I am not going to give detailed reasons now but there are a few brief explanations.
The idea is that elections create populist politicians who do things to impress the respectable readers of respectable newspapers like the Sun or the Daily Mail. Ideally the House of Commons should be scrapped (so no more elections) but if the masses think that it is a democracy and they are in control they will be more likely to accept things.
TB was advised by the security services that if he went to Iraq this would cause an increase in the threat to the UK. He did not listen. The security servies, the DPP and several Chief Constables said 42 days was not necessary, GB did not listen. Same for ID cards (I think). In many case civil servants know better and take better decisions than elected politicians (who just want to appear favourably in the eyes of the tabloids).
What does everybody think?
PS: Ideally the State should be abolished or should just be a sort of Night watchman state.
January 22, 2009
This is a slightly different version of my comment published in The Boar of T2 wk3 08/09
George Orwell said the following about fascism:
“The word ‘Fascism’ is almost entirely meaningless. In conversation, of course, it is used even more wildly than in print. I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox-hunting, bull-fighting, the 1922 Committee, the 1941 Committee, Kipling, Gandhi, Chiang Kai-Shek, homosexuality, Priestley's broadcasts, Youth Hostels, astrology, women, dogs and I do not know what else... almost any English person would accept ‘bully’ as a synonym for ‘Fascist’”.
The same is happening today with racism. The definition of the term is becoming increasingly wide.
In a private video three years ago Prince Harry referred to one of his Sandhurst colleagues as “our little paki friend...Ahmed”. He did not seem offended nor did he file a complaint. The video has now been made public and the use by Prince Harry of the “P-word” has caused a lot of negative reactions. Everyone from politicians to Muslim leaders condemned Prince Harry for what he said. It was racist and offensive they said.
Prince Harry used the term in an affectionate way. Paki is simply an abbreviation for Pakistani. It's true it has been used as a racist term. But this should not mean that every use of the term is racist. Racist individuals should not have the monopoly of using this word. Indeed, according to an article by the BBC, some young Pakistanis use it themselves. What is important is the context and the intention of the person using the word. “Filthy paki” is completely different from “my little paki friend”.
Those who label Prince Harry's action as “racist” contribute to the weakening of this word. This may eventually lead to taking all the power away from this word and making it a synonym of bully.
The use of a word may be offensive to some but this does not mean someone should be socially banned from using it. As Orwell said:
“If liberty means anything at all, it means the right to tell people what they do not want to hear.”
Her Majesty and by extension the Royal family are a unifying figure in Britain (or at least they are supposed to be). They should not do anything which could be (mis)interpreted as being divisive. This is the reason why Prince Harry should have apologised and it is right that he did so. We should however bear in mind that this was a private video.
“Anybody who uses derogatory terms such as the 'P' word and other words are obviously from a different age. He is trying to portray this image of being caring like his mother, who was a great woman, or his father who's a person who's widely respected across the world. He's a thug.”
He later apologised for calling Prince Harry a thug. His emotions had got the better of him, according to the Times.
What is interesting to note is that his comments have drawn very little criticism. Is what Prince Harry has done so much worse than calling someone a thug? Or is it just political correctness?
November 26, 2008
I felt it is a sensible way to procrastinate.
Most of you probably do not care but here is what I think will happen in the world:
- Barack Obama will be America's Tony Blair
- New Labour will win the next general election by a very small majority
- Britian will become even more authoritarian
- Project Cameron will fail
- The libertarians will dominate the Tories
- The NUS will die
- The courts will rule that they have the power to strike down primary legislation
- Someone will prove the Riemann Hypothesis
- Nothing special will happen in 2012
June 15, 2008
Writing about web page http://en.wikipedia.org/wiki/Magna_Carta
Today is the anniversary of the day, in 1215, when the King of England appended his royal seal to an agreement with his rebellious barons which has since been held to be the founding document of English liberty.
Here are the clauses still on the statute book today:
- I. FIRST, We have granted to God, and by this our present Charter have confirmed, for Us and our Heirs for ever, that the Church of England shall be free, and shall have all her whole Rights and Liberties inviolable. We have granted also, and given to all the Freemen of our Realm, for Us and our Heirs for ever, these Liberties under-written, to have and to hold to them and their Heirs, of Us and our Heirs for ever.
- IX. THE City of London shall have all the old Liberties and Customs which it hath been used to have. Moreover We will and grant, that all other Cities, Boroughs, Towns, and the Barons of the Five Ports, and all other Ports, shall have all their Liberties and free Customs.
- XXIX. NO Freeman shall be taken or imprisoned, or be disseised of his Freehold, or Liberties, or free Customs, or be outlawed, or exiled, or any other wise destroyed; nor will We not pass upon him, nor condemn him, but by lawful judgment of his Peers, or by the Law of the Land. We will sell to no man, we will not deny or defer to any man either Justice or Right.
May 09, 2008
All of this is very interesting but I fail to see the political aspect of it (the article is listed in Politics). Why should the public know in which school the PM and the LO send their kids to?
Maybe it is just me being French but what is the relevance of the proportion of ethnic minorities? Do they learn differently [sic]?
There is one interesting issue though: is Cameron sending his daughter to a state school because he thinks it would be better than a private school or is he doing it to for political reasons?