Saturday, May 9, 2009

Lies, Lies, Lies

My aim in this blog has largely been to give my best and most rational perspective on the reality of the economic situation. I have tried (and I hope) mostly succeeded in avoiding emotive and partisan viewpoints, and have tried as far as possible to see the actions of politicians as misguided. Of late, that perspective has been slipping, for the UK, the US and also for Europe.

I think that the key turning point was the Darling budget, in which the forecasts were so optimistic as to be beyond any rational belief. The budget was built upon these forecasts, and I simply do not believe that either Darling or Brown might even begin to believe such willful nonsense. Under such circumstances, it looks very much like Brown and Darling are willing to risk severe damage to the UK economy in order to prop up their electoral chances.

There are even more worrying signs, and these are more of a broad concern which extends beyond the UK into the whole Western world. Regular readers will know that I do not buy the conspiracy theorists, or that there is a nascent New World Order. I am far more inclined to the view that incompetence and idiocy are greater drivers of events than hyper-intelligent Mr. Evils plotting world domination. Furthermore, many of the conspiracy theories are nothing more than anti-Semitic nonsense, and if you are regular reader you will have seen many examples where I have highlighted such nonsense.

As for the idea that the evil bankers might have engineered this mess as a route to world domination, it is simply a laughable and implausible joke. As the major banks teeter on the brink of insolvency, with only government between them and oblivion, any notion that this might be a conspiracy for world domination looks positively delusional.

Having said all of this, it is not to say that there is nothing wrong at all. There are some very worrying aspects to this financial crisis, and that includes the role of both the financial institutions and the governments of the Western world. I am still not clear, even at this stage, whether the actions of governments are a combination of misguided thinking and power corruption, or just plain power corruption. What I am ever more certain of is that there is an unholy alliance between the financial institutions, central banks and government. To call such an alliance a cabal, or other such names, would be to dignify a rag-tag of self-interest and 'clubbiness'. However, that economic policy has ceased to serve the electorate, and is increasingly serving the large financial institutions is increasingly clear.

I do accept that the initial bailouts of the financial system might have been a panicked reaction to an emerging crisis, in which the politicians might have groped for any solution to try to stave off disaster. In order to do so, they inevitably turned to the heads of the central banks for advice and guidance, and may not have realised that the central banks were far too cosy with the institutions which they were supposed to 'supervise'. As such, we can safely put the initial reactions to the economic crisis down to a misguided and panicked reaction, though this can not be certain.

A good perspective on the relationship between banks, government and central banks has been provided by a commentator. The former Chief Economist of the IMF, Simon Johnson, has written an excellent article entitled 'The Quiet Coup', and he also includes how academic economists have been seduced into the orbit of influence of the major financial institutions. He paints a picture of the to and fro between government and the banks, from academia to the banks. For example, he has this to say of the close world of banking and politics:
One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.
My intention is not to rework an article that expresses very well and very clearly the clubbiness of this world. I would suggest that you read the original article, which is long, but worth the read. Instead, what I would like to do is put this in some kind of context, to explain how the unholy alliance between the politicians, academia, the central banks and the financial giants is leading the West down a road to destruction.

In my last post on the state of the US economy I discussed the fact that there was something very, very wrong with the bailouts in principle. From the very first bailout, I have consistently opposed the actions. In particular, I pointed out in my earliest posts on the subject, that the first bailouts would be followed by further bailouts as the economy spiralled downwards. It was very clear from day one of the bailouts that the banks were in worse shape than anyone was admitting. At that early stage, I just thought that the politicians were misguided, that the central banks were misguided. It may indeed be true that this was the case, but I am not sure that we will know for certain. Perhaps they always knew that the situation was only going to get worse - much, much worse?

So what is the fundamental problem with the bailouts? Quite simply, as I pointed out in the early posts, the bailouts will, one way or another, be paid for by other businesses and ordinary tax payers. We were told, from those early days, that the financial system must be saved, or see the economy collapse. This is the justification for this unprecedented and gargantuan attempt to support these insolvent financial institutions.

Back in the early days, there was sufficient confusion and shock for this point of view to gain traction, and to allow for the bailouts to progress forwards. However, the scale and scope of the bailouts has continually been obscured, and what has never been widely apparent is just how much of the total economy is now directed towards saving these insolvent financial institutions. Quite simply, the entire Western economic system now appears to be pointed towards rescuing these insolvent institutions. It is, to say the least, the most shocking economic madness.

Another article, from the same magazine as the Simon Johnson article, details the astronomical figures for interventions by the Federal Reserve. A summary of these, as well as the bailouts from the government, can be found here. It is worth a long look. The author of the article has this to say:
Through a dozen programs introduced since the crisis began, the Fed will be on the hook for trillions of dollars in loans, bailouts, and asset purchases. The government expects to be repaid for most of these commitments, of course, with interest. But that’s the tricky part. Largely unencumbered by congressional meddling, the Fed has in most cases refused to reveal the beneficiaries of its largesse—or what assets they’ve used as collateral—lest panicky investors and depositors lose faith. As a result, outside the walls of the Eccles Building, almost no one knows how sound those loans really are.
In one very effective interactive graphic, the scale of the overall combined US government and Federal Reserve assistance becomes apparent. Again, spend some time on the chart. It is quite simply astounding.

If we then look at the UK, we see a similar pattern, but I have yet to see a source that pulls all of the costs together so neatly. From the Guardian, we have a graphic which shows the direct bailouts as £25 billion Northern Rock, £42 billion Bradford and Bingley, £37 billion HBOS/RBS/Lloyds, £22.5 billion more for RBS, and up to £10 billion for Lloyds. On top of this is the Credit Guarantee Scheme which is to:
make available new capital to UK banks and building societies to strengthen their resources, permitting them to restructure their finances, while maintaining their support for the real economy; and ensure that the banking system has the funds necessary to maintain lending in the medium term.
The scheme provides up to £250 billion worth of guarantees (the page linked to says 'at least £200 billion), and the users of the scheme are dominated by the 'usual suspects' such as RBS, but also includes Tesco Finance. We then have the Asset protection scheme, at £525 billion, with (you guessed it) RBS already having £325 billion insured under a scheme to insure risky assets, described by Vince Cable as:
“fraud at the taxpayer’s expense” and that it was weighted heavily in favour of the banks, who were being invited to dump their worst assets on the Treasury.
To these bailouts we need to add the Special Liquidity Scheme, 'to allow banks to swap temporarily their high quality mortgage-backed and other securities for UK Treasury Bills', which adds up to another £185 billion lent by February of this year (the Bank of England claims that there is no risk in the scheme - but why was it then necessary?). Finally there is the Asset Purchase Facility (£50 billion at the outset), which has subsequently morphed into the £150 billion quantitative easing scheme.

All told, these facilities add up to a massive government/central bank response to the insolvent UK banks, with many of the facilities creating massive potential liabilities. We are looking at a total that amounts to around £1 trillion of support for the banking system.

In both the US and the UK, the scale of this activity has seen a massive growth in the balance sheets of central banks, and a huge increase in their potential liabilities, as well as huge expansions in government debt.

It is at this point that we need to pause, take a long breath, and actually consider what it is that the banking system is for. In the many bailouts and rescues, we simply hear that the financial system must be saved, but do not hear what it is supposed to actually do. The standard line being trotted out is that the banks must be saved to get credit moving again. The question here is why it is that the limited numbers of banks that have received most of the various support measures are so important, and that is the question of what financial services are actually there for.

It is when we ask this simple question, this blindingly obvious question, that we can see the level of the fraud that is being done to the taxpayers and the damage to the wider economy. The financial system is indeed important in the provision of credit, in particular it is important in the provision of mortgages, investment in business and so forth. The core function, the real function of financial institutions, is to take the savings from person A, and make the money available to person B, or company C. As part of that process, the expectation is that the bank will lend the money with a level of care which is appropriate to the level of risk expected by the saver.

Here we have the problem. That is it. That is the only function of a bank/banking system in a healthy and well balanced economy.

As long as there are banks able to undertake this role, then the banking system is operating. In no way is any individual bank necessary for the underlying function of the financial system. Banks are intermediaries which should be there for the investment of savings, and provided that banks are able to function in this way, then the system is operating.

I am sure that this point of view will inspire objections (I look forward to the comments), such as the idea that the failure of the 'too big to fail' banks would have seen major bank runs, and a period of financial chaos. I do not, and have not, disputed this. The inevitable result of the failure of, for example RBS, would have been lines of people at every major financial institution, and a systemic failure. There would also have been social disorder and a period of great stress. However, the pain would have been short and sharp, and far less costly to the wider economy. It would have cost, but the bill would have been so much less than that which is now accumulating.

But here is the problem. We are now in a situation where our economic future is now being poured into the bottomless pits of financial institutions that are still insolvent, and which are going to need ever more support on an ongoing basis. The insolvent banks are quite literally eating up our present and future wealth, and threatening the very integrity of the Western economic structure. It is turning an economic crisis that turned into a financial crisis, and now risks turning these crises into a economic crisis of a magnitude that will threaten everything that the Western world has represented.

These are strong and dramatic assertions. However, as I have watched this crisis unfold, I have at various stages seen opportunities to turn the situation around. At every point in the crisis I have seen ever deeper digging of the hole in which we find ourselves. I now think that we are reaching the stage where the nature of the bailouts, the nature of the eventual cost to the economy, are so great that the very faith in systems that have supported Western democracy might be undermined.

In particular, the amount of support for the banking system is a ticking time bomb, and a time bomb because, quite simply, those that are governing us are lying about the costs to ordinary people - the cost for their support, and the denial of the risks that they incur with each round of bailouts.

I have come to this conclusion over several months. I have watched as insolvent banks are allowed to declare profits when they are insolvent through accounting tricks - supported by governments and central banks. All we have to do is see the massive support that has been poured into the banking system to see that any notion of profits must be a lie, but governments, central banks, the media, and even academics are all supporting this lie.

More recently, we have seen the so called bank stress tests in the United States. As one analyst identified (sorry, I can not find the link), even under optimistic projections, there is a massive amount of losses coming the way of the banks. Apparently they only need $75 billion of new capital, even though this is nowhere near enough to cover such losses. As the analyst pointed out, for the stress tests to be set at the right level, this would mean that the banks are currently massively over-capitalised - a complete absurdity. A brief review of the news stories (e.g. here) showed that the banks were negotiating on the levels of capital that were required of them. How can this be justified?

Quite simply, we are being lied to in a systemic way. The banking system is still insolvent, and ever more support will be needed to hide this reality. This is support at a cost that is creating ever greater strains on the rest of the economy - and which will eventually sink the rest of the economy to a low that we can not imagine.

All built upon lies, lies, lies.

As if this were not all bad enough, we have what has become a subject of great interest to this blog - the weasel worded quantitative easing, or printing of money by central banks. As I have pointed out endlessly, this is one of the most outrageous policies that is being undertaken by the central banks, and can only end in ruin for the economic well being of the countries undertaking it. The explanations for the policy all follow a line that says that it is to ease credit in the marketplace, but the problem is that - once started - it seems to rapidly move into the purchase of government debt. Whilst there are technical explanations trotted out for this, it seems more than coincidence that the central banks undertaking this are those who are issuing huge mountains of government debt.

If you doubt this, take a look at the debate for the European Central Bank's move to the policy, and you will find that it is the southern countries of Europe and Ireland, countries in economic freefall, true bubble economies, that have pushed through the policy against opposition by Germany. Whilst government debt is not on the list for purchase yet, viewing the countries that pushed the policy it can only be a matter of time.

As if this is not bad enough, that central banks are indirectly monetising government debt, there are rumours that governments are now buying their own debt. This is still unsubstantiated, but this from Ambrose Evans-Pritchard:
Traders already whisper that some governments are buying their own debt through proxies at bond auctions to keep up illusions – not to be confused with transparent buying by central banks under quantitative easing. This cannot continue for long.
Quite frankly, I suspect that the rumours are true. When discussing QE, this was one of the themes, or scenarios, that I considered. If true, at some point the truth will eventually emerge, and the consequences can only be dire.

Once again, we have lies, lies, lies.

And then there are the economic forecasts. We have the infamous Darling budget, a work of fiction, a new sunny forecast from the Bank of England (but nevertheless a suggestion of continuing extension of quantitative easing??), Bernanke and his optimism for recovery in consumer spending and the housing market and for the banking system. I hope that I showed in my recent review of the US economy that, quite simply, there is no prospect for any imminent recovery - at best a brief uptick or an inflationary 'recovery'.

Lies, lies, lies.

Above all else, we can see the lies working their way through the stockmarkets. If ever there were a suckers rally this is it. From one blogger, we have lists of 'insiders' buying and selling, with insiders selling hard (see here, here and here). Quite simply, this rally is built on lies, as no recovery is in sight. No doubt, those that will be hurt in the rally will be the outsiders, or ordinary people.

And the truth? In the UK, there are bloggers like myself, and a small number of commentators who question what is going on. For example, there is Fraser Nelson at the Spectator who, whilst a partisan commentator, is highlighting the 'fishiness' of quantitative easing. There is Liam Halligan at the Telegraph, who highlights in his most recent article that the end of QE will create a problem of how to sell bonds into a saturated market. There are more, but overall there are far too few commentators who are confronting what is going on, and questioning the underlying lies.

In the US, the situation is slightly better. Although there are legitimate critiques of Austrian economics, at least they are highlighting the nature of the lies. The Mises institute is pouring forth a steady stream of articles highlighting the madness of what is going on, with Ron Paul pulling that critique into practical political action (such as his campaign for an audit of the Federal Reserve). On top of this, there are the maverick bloggers, and the influence of people like Peter Schiff.

Most alarming of all, the greatest and most listened to cynicism is coming out of China - who see the QE policies of Western governments for what they are - harbingers of inflation. How desparate is it when it takes a totalitarian state to ram the truth home?

This is why I am writing an unusually angry post. I am sick of the lies that issuing forth, and I am sick and tired of the way in which the insiders appear to win, regardless of the cost to the rest of the economy. I have watched in horror as these bailouts have chewed up the wealth of the Western economies, both present and future wealth. I have watched in horror as governments have issued ever more debt to support their profligacy and support insolvent banks. I have watched in horror as central banks have commenced monetising government debts, and likely engineering inflationary defaults whilst risking eventual hyper-inflation.

Above all, it really does appear that governments and central banks are willing to sacrifice ever greater swathes of the economy to rescue incompetent and insolvent financial institutions. The only explanation that fits the facts is the grubby clubbiness of the system. It is not the great New World Order conspiracy, but rather the conjunction of interests between well placed individuals. Each, in their own way, moving forwards for their own personal gain. It is not the activity of great conspirators, but rather the collective movement of little men, of people who can think only of their personal gains. Money, vanity, power.

And the cost....

.....for there surely will be a cost.

That the economy will be left in tatters, I have no doubt.

That will mean unemployment, insolvency and hardship for many. But the cost will go much deeper than this. When the situation resolves to its eventual conclusion, and the real hardship starts, then the questions will start. The first and largest question to be asked will be to determine where our wealth went. Where did all of our wealth go?

At that point, as the lies are shown for what they are, there is the risk of the greatest cost of all. The risk is that people will start to question the legitimacy even of our form of government. The risk is that democracy is now in the firing line.

In the UK, a scandal is unfolding, a petty and mean scandal over how MPs have cheated their expense system. The status of politicians is at an all time low. If we look to the US on the other hand, the situation looks more benign. Obama is receiving widespread approval from those that he leads. In the case of Obama, I can see only the motive of personal vanity - that he believes his own mythology of being a saviour. However, in painting himself as a saviour, he risks the anger of dissillusionment when disaster comes in place of salvation. That is a dangerous thing.

When people are angry, when they feel disillusioned, and when they feel cheated - as they surely have been - that is when the crazies gain traction. The promises of brave new worlds, of new beginnings, the pied piper tune of 'if you just follow me...' This is the risk. I have alluded to this risk in a few early posts, and it has been part of my drive in writing this blog. I think we are now close to a point where such a risk is becoming real.

The extent of the manipulation, the cheating, the lies is now extending beyond what might be accepted. I think that people will become very, very angry.

An unhappy post.....

Note 1: I hope that this post does not offend regular readers. I have paused on hitting the publish button on this occasion. However, I think that this is worth saying. I believe that now might be the time for anger, as a way of possibly forestalling a greater anger later. As I wrote this post, I kept in mind that one of the commentators on the blog, Steve Tierney, is a politician. I think that even those that disagree with Steve would accept that he is a sincere and decent person. As such, I have some optimism - that perhaps there is an opportunity for a more decent and honest politics. My underlying worry is that perhaps there are too few of such people.

Note 2: A big thanks for the links against my last post, which led me to some articles that helped me pull this post together. As ever, very good comments, and my apologies for my lack of replies (as this post took a while to put together).

46 comments:

  1. Cheer up, Mr Cynicus! The Daily Telegraph has just published a list of 10 reasons why we shouldn't be worried about any impending economic meltdown.

    http://www.telegraph.co.uk/finance/financetopics/finance-predictions-2009/5297492/10-reasons-to-be-cheerful-about-the-economy.html

    The fact that one of the reasons is "It's going to be a nice summer with lots of sunshine" shouldn't be taken as a sign that they are clutching at straws.

    Seriously though, the mainstream UK media should be ashamed of itself for the compliant way it reports the Government line on the economy. Printing 'reasons to be cheerful' lists at a time like this is another sign that those in positions of power have nothing but contempt for the general population.

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  2. Hi CE.

    I think you've summed up our situation pretty well. I have read that Simon Johnson article and I was impressed at how frank he was regarding the probable treatment from the IMF when the UK joins the handout queue.

    This self-delusional budget planning and money-go-round spinning exercise can only lead to an IMF bailout, (accompanied by any manner of caveats) don't you think? I suppose the only question is - will the IMF be in a position to respond?

    I'm glad you've pointed out the fact that for the most part, the media seem to dare not examine where the current financial crisis countermeasures are leading in all probability.

    As Robert Peston points out, it looks unlikely that there will be any structural change within the current financial system in the near future.

    From the government's point of view, it appears that the current dire situation peversely justifies a return of the pre-crisis system rather than a reason to tear it down. And there are quite simply too few dissenters amongst our powerful to argue otherwise.

    Therefore, as you say, the only way we will see the necessary reform is when all of the money is gone and widespread social upheaval is upon us. The baby really will have to be thrown out with the dishwater before change is implemented - which is a very sad and destructive outcome.

    Personally I still hope that the IMF might be able to step in and impose change before it comes to that, as part of their loan conditions. If ever there was a role that a last resort lender has to take then it is to force change on a corrupted (not corrupt, but corrupted) financial and political regime such as the UK's.

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  3. I think the analyst talking about the US bank stress tests could be this:

    http://finance.yahoo.com/tech-ticker/article/243817/The-Big-Lie:-Stress-Test-Optimism-Just-Wall-St.-Propaganda,-Former-Bank-Regulator-Says

    Its also on:
    http://www.creditwritedowns.com/

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  4. Sobers: Thanks. That was indeed the article.

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  5. Great blog IMO. Second only to "The quiet coup" which you mentioned, and more readable.
    You don't discuss what ordinary people should do to protect themselves, understandable as giving advice is dangerous. To avoid this difficulty, please can you post what YOU are doing to protect yourself and your family.

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  6. Good article CE, eventually I knew that you were going to get angry. I'm already past the point where I'm getting mad at politicians for their stupidity, I just need them to keep this disaster together for two more years and off I go....
    What most people don't get is that once the currency is shot it will be permanently shot as the confidence that kept it at a prior high value will be eroded, along with trade and fiscal deficits that'll mean even higher prices for imports.
    I appreciate that you're trying to think positively of politicians and the like but surely now you'll realize that they nearly always choose the cowards way out?
    I have more trust in China's communists than any European party.
    Look back at the last thirty years, who has been living from its past glories and who has been constantly pushing for more? Take away Europe's thousand best engineers and the whole place falls apart.

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  7. Mark,

    Great post!!! You say that the bailouts are sheer "economic madness". But what does "economic" mean in this context? It is not "madness" for the financial institutions concerned - hey, they've actually started showing "profits". It helps that the people who are behind these rescue plans are previous/present/future employees/owners/beneficiaries of the institutions in question. The corollary of an anti-conspiratorial stance is just as there are no evil cabals plotting the destruction of civilization, there are also no "hidden" benevolent forces ensuring its prosperity (unless one believes in the "hidden hand" of Smith).

    I think that there is a growing realization in the West, that our system is out of kilter. The policies pursued by our governments in the last couple of decades have not been in the long-term interests of our nations. Unlike people in other countries, we do have ways of making our politicians accountable to our will. But this requires rejection of the neo-liberal ideology, used as a smokescreen by special interest groups which benefited at the cost of everybody else. Most people have been content to turn a blind eye to the rape and pillage that's been going on during the boom years, but nothing concentrates the mind as effectively as personal hardship, which seems to be upon us. Let us hope that enough people will start thinking for themselves. I don't put much faith in the resurgence of "revolutionary" movements such as socialism or anarchism (although that may happen), but in the awakening of "normal" people, like your regular commentator Steve Tierney (who also has a very interesting blog)

    Despite numerous protestations that you are not a "conspiracy theorist", surely your post "Lies, Lies, Lies" would make you vulnerable to such an accusation , don't you think? I'm joking of course. "Conspiracy theorist" is a term of abuse, and its purpose is to shut down discussion and discredit the opinions of the "theorist". In an unguarded moment, about three years ago I expressed an opinion to a colleague, that the UK property market was insanely overpriced, and about the general unsoundness of modern finance. As a result, he started sending me links to various web sites, which dealt with issues such as UFO abductions, the "real" killers of JFK etc. Such is the price of independent thought...

    Finally, I'd like to recommend a blog I stumbled across some time ago, and would have dismissed out of hand had I known anything about its author (he is an Arch Druid and believes in magic - need I say more?). Its subject matter (basically the consequences of oil depletion on our civilization) is only tangentially related to the issues raised here, but well worth taking a look. He writes extremely well. This is a good example of not judging somebody by labels.

    http://thearchdruidreport.blogspot.com/

    Best regards

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  8. Wow!!! Your assertion about the ineptitude, ignorance (and arrogance) of decision makers is, most regrettably, absolutely true. Hence the probability of non-deliverance from their contrived, heroically successful failure is +1.01!!! The critical issue for now is to try to predict the nature and time of a 'tipping-point' event. You might be able to salvage something for yourself and your family.

    Brian P

    Aristotle asserted that Democracy was corrupt - I now understand why.

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  9. Cynicus,

    I think you have done extremely well not too have gotten angry up until now! I too have been looking on in dismay at all the talk of green shoots and the impending return to economic growth. It's as if the massive levels of corporate, consumer and government debt, peak oil, the challenges presented by climate change, unrealizable pension obligations, etc. were all just a bad dream. All of these challenges - and more - appear to have been fixed overnight.

    I'd like to take this opportunity to point the readers of this blog to Chris Martenson's Crash Course at http:\\www.chrismartenson.com. Apologies if it's been mentioned here before, but it's well worth a visit.

    Raj

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  10. I would argue that there is overcapacity in the financial services/banking industries and that we actually need some players to disappear completely to get a properly funtioning industry. The same is true for the car industry and has been true in the DRAM industry for years. Since the bubble is burst, we need less banks and bankers. As simple as that. If the politicians had used this tack in the first place and pushed a restructuring agenda, then this could have been beneficial in the long run.
    Peerke

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  11. Fantastic post.

    We will remain in the minority however, that is for sure. The real question is, how do we protect ourselves from what is so obviously unfolding?

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  12. A really enjoyable post.

    I have long marvelled at your calm and clinical appraisal. I wondered how bad it would have to get before you let the emotion out.

    Honestly, it's quite nerve-wracking that you have. Things must be pretty damn serious if CE is getting angry!

    I really appreciate your comments about me. But really, I'm a 'newbie' political candidate, standing for the first time on June 4th. I could easily lose. That's about as low a rung on the ladder as you can conceivably get.

    I should say though that in the last year I've met lots of "political people" and all I keep finding, over and over, are decent, honest, likeable folk. In all the parties.

    Once this mess at the top is sorted out, I retain much hope that a recovery can begin.

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  13. @ Cynicus

    An interesting piece.

    To your "unholy alliance" of financial institutions, central banks and government, I would also add 'the mainstream, corporate media' - who you've rightly lambasted on a fair few occasions.

    My more general comments became too large to post here so I have put them on my blog - you can read (and comment) on them here if you wish.

    @ Escaping Eastwards

    re "I have more trust in China's communists than any European party."

    Sounds suspiciously like the old "at least the trains ran on time" arguement in favour of fascism.

    @ MattInShanghai

    re "I think that there is a growing realization in the West, that our system is out of kilter. "

    I think you're right. I just worry that the 'critical mass' of people needed to actually do something about it may come too late.

    re "I don't put much faith in the resurgence of "revolutionary" movements such as socialism or anarchism (although that may happen), but in the awakening of "normal" people, like your regular commentator Steve Tierney (who also has a very interesting blog)"

    Would love to hear you elaborate more on this; I for one fear the tyrany of the 'normal people'!

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  14. Cynicus, you are slowly getting there in exposing this 'Ponzi' scheme of our current financial system destroyed by socialist high spending and borrowing governments.

    But you still have not spelled out that the only reason the governments bailed out the banks is so that they (not businesses) can still have institutions to lend them money via gilts to fund their high spending and false promises just so as to remain elected.

    ie. that the governments are borrowing from themselves via the government capitalised (with borrowed money) nationalised banks using the fractional reserve banking system to borrow 10 times more than they lend to the banks for capital. At the same time they use the central banks to buy back some bonds (QE) such that they maintain the market price of bonds whilst the foreign previous investors are taking their money out of pounds and are no longer purchasing gilts.

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  15. Great post!

    I see this as a correction, the unwinding of ridiculous teetering structures back to sustainable levels. In that sense it should be a good thing for people generally as it should enable us all to live more small-scale commmunity based lives rather than rat-race competing. However I do see the long drawn out meddling of bailouts etc. is doing its best to transfer what wealth there is left, from the masses to the wealthy.

    I worry about attempting to save ourselves individually, we all depend on our communities and societies (even the most individualist of us!)

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  16. You need to watch this video on the Modern Money Mechanics by the Federal Reserve.
    http://www.youtube.com/watch?v=vm3DixfL9o0

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  17. "The insolvent banks are quite literally eating up our present and future wealth"This is true only if we continue to 'honour' the current face value of the tokens we are printing and spending. It seems to me that the idea that the whole world shares the same view of the value of a dollar or a GBP is long since past.

    I no longer believe that when we "save" money we are storing up anything real for the future. The value of money is just temporary and mutable, so if we reach a point where trade and wealth generation is not possible because of accumulated distortions over many decades then we will just have to abandon the old system and start afresh. There is no point in holding countries to their current debts if it takes longer than their, or the creditors', lifetimes to settle them. Bankruptcy just means that we wipe the slate clean and start again one way or another.

    ReplyDelete
  18. The Chinese want the designs for the next generation of iPod; the Arab sheiks want gold-plated Range Rovers.

    If the West is made to honour its debts at face value over generations then these things will never happen.

    ReplyDelete
  19. I'm seeing links to this post aplenty out there in wwwland, and rightly so.

    This article is also being extensively linked, thought you might be interested:

    http://cluborlov.blogspot.com/2009/05/new-new-money.html

    ReplyDelete
  20. Beijing announces that the Yuan can now be used in international trade:

    http://cluborlov.blogspot.com/2009/05/new-new-money.html

    The end of the Dollar takes another small step....

    ReplyDelete
  21. most boring financial blog on the planet.

    ReplyDelete
  22. There are many reasons to be optimistic.

    One must remember that interest rates are set by the market, not the Bank of England. The Bank of England sets a target rate and then interferes in the markets to try and achieve the target rate. QE is a tactic that is used to interfere in the market.

    However, despite the target rate being 0.5%, effective rates have been much higher meaning there is still a credit crunch. Recently, the effective rates have been falling. This is a sign the credit crunch is ending.

    I am confident that the credit crunch will end soon.

    Of course, I believe there are other problems that could be potentially very troublesome such as government debt and huge inflationary pressures. But regarding the credit crunch, there is reason to be optimistic.

    Regarding the foreseeable future, the current crises is interesting because there are two extreme outcomes.

    The good outcome is slow growth, maybe with the odd quarter of slight contraction. Generally, the decline will stop and a new era of capitalism will begin, albeit much more timid.

    The bad outcome is a continued decline and break up of the economy over the next decade, leading to an effective economic meltdown.

    I cannot see any medium ground between these two outcomes. This is why we are in the danger zone. My unqualified estimation is 75% good outcome, 25% bad outcome.

    I think growth is the best guide and if GDP contracts at an annualised rate of more than 7.5% in Q3 and Q4, we are heading for the bad outcome.

    ReplyDelete
  23. Re China and the USD, there's a very interesting post on Dmitry Orlov's blog today:
    http://cluborlov.blogspot.com/

    ReplyDelete
  24. @ Tiberius

    I tried to get to your web page, but sadly for some reason or other the PRC authorities (in their infinite wisdom) have decided to block it. I suppose I was a little glib in expressing my faith in the "tyranny of normal people". The situation is much more complex, and if history is anything to go by, any radical changes in a society are usually accompanied by a prolonged period of chaos, instability and bloodshed, and when the dust settles, the changes are not always for the better. I certainly have no stomach for going through such a process. But there has recently been a period of radical change, without any of the convulsions of revolution - the 40 or so years in Western societies after 1945 (admittedly after a horrific world war). During this time overall prosperity increased tremendously, as a result of a consensus between the elites and "normal" citizens. Much of this consensus still exists in social-democratic societies, such as Germany, the Scandinavians and France, although decades of neo-liberal propaganda, agitation and arm-twisting have slowly begun to erode it. The USA and Britain have been at the forefront of this process of destruction of the "welfare state" (and New Deal in the US), and perhaps the current financial collapse will cause a re-think of the direction we are taking, and generate enough political momentum to change things. It may be too late however, as you say.

    The reason I mentioned commentator Steve Tierney, was that (an opinion formed on the basis of his posts and his own blog) he seems to be typical of a large and potentially influential segment of British society, which combines a natural distrust of any "radical" ideology with a sense of civic duty and practical activism. I'm sure that two or three years ago, during the height of the "boom", he would have dismissed the opinions expressed by our host and many of his commentators as the ravings of lunatics and conspiracy theorists. This perception is now slowly beginning to change, with the "radical" opinions becoming more and more part of "mainstream" thinking, and it is to the credit of CE and other bloggers (including a few mainstream journalists and writers) that the situation has moved in this direction.

    Best regards

    ReplyDelete
  25. Staying And FightingMay 11, 2009 at 11:38 AM

    Escaping Eastwards wrote:
    "I just need them to keep this disaster together for two more years and off I go...."What makes you think the Orientals will want you in their countries after the west financially melts down? You do know that China and Japan are very racist and nationalist countries don't you? They always put their own people first.

    "I have more trust in China's communists than any European party. Look back at the last thirty years, who has been living from its past glories and who has been constantly pushing for more? Take away Europe's thousand best engineers and the whole place falls apart."So instead of staying and fighting to right the corruption in your own country you're going to run away. And apparently your proud that your running away.

    ReplyDelete
  26. Just a quick note. Three links from commentators to the blog post here:

    http://cluborlov.blogspot.com/2009/05/new-new-money.html

    He does not cite a reference for the Industrial and Commercial bank statement, but I see no reason not to take it seriously.

    If this is correct, then it confirms my belief that China is making a bid for the RMB as the next reserve currency.

    The implications are, of course, much wider. If this is the case, and I can confirm the source, I will probably discuss this in my next post.

    ReplyDelete
  27. @ Tiberius
    The economic track record speaks for the Chinese, that's what I'm basing my faith on. Staying in Europe definitely means much higher taxes, even for those in the lower bracket, less economic freedom and being ruled by an inept political class that is in bed with bankers.
    I don't think that the West is capable of producing the necessary cultural shift within the timeline necessary. To put it short, ever since I was a teenager (I'm a politics nerd ;) ) I was fed up with the culture. Thoughts lead to actions and those have consequences which can be observed now. Who receives more praise in the West, the entreprenuer who builds something or the kid that damns the CO2 emissions coming from that factory?
    Western people longer want the means of production, they can now see what happens if you stop being productive.
    (I am of course massively generalizing and actually refer to a sufficiently large part of the population that is able to block economical progress with its views)

    @ Lemming
    Rules are rules, just because it says US, Britain or Argentina does not alter a damn thing about the math behind. The deficits are structural and with more and more people retiring the deficits are bound to be even larger. If you **** foreign financing now you can tell all those aged above 55 to keep on working until they die because there will not be any money to pay for them. A clean slate is of no use whatsoever if the structure that lead to this does not change, why would any natural-ressource-exporting nation export to the West if they can't pay for it and defaulted on their debt? We need to PAY for the things we want. This is why I am getting so massively angry at what's happening right now, we are digging ourselves into a hole so large that it will take our kids to get out of here.
    Default on debt and push half the world on China's side? That would be utter, utter madness. The West is close to finding itself with less allies than China. Within thirty years!
    The West is running a structural trade and fiscal deficit and is losing its cultural edge at the same time. This is so crucial to understand.

    @ Staying And Fighting
    Fair play to you, I decided to get out of politcs long ago.

    ReplyDelete
  28. Regarding:

    http://cluborlov.blogspot.com/2009/05/new-new-money.html

    The only source that I could find was an agreement signed on May 9th between the Vice Minister of Commerce of the PRC and the Financial Secretary of Hong Kong. This was a supplement to the Mainland and Hong Kong Closer
    Economic Partnership Arrangement which concerns itself with liberalization of trade between China and Hong Kong.

    Here is what it has to say specifically about liberalization in the financial sector:

    II. Financial Cooperation
    The two sides will adopt the following measures to further strengthen
    cooperation in the area of finance:
    (1) The Mainland shall allow qualified Mainland securities
    companies approved by the China Securities Regulatory Commission to
    set up subsidiaries in Hong Kong in accordance with the relevant
    requirements.
    (2) To actively explore the introduction of ETF (open-end indextracking
    exchange-traded fund), which portfolios are constituted by Hong
    Kong listed stock, in the Mainland.

    Unfortunately there is no specific mention of increasing the use of yuan between the two countries.

    http://www.tid.gov.hk/english/cepa/legaltext/files/sa6_main_e.pdf

    ReplyDelete
  29. Escaping Eastwards

    A few months ago I believed that the West was finished economically, but I've changed my opinion slightly. Speaking to people from overseas it is clear that they admire Britain for its amazing energy and openness to change. And some foreign top class engineering graduates I have encountered have astounded me by their lack of ability.

    Perhaps the world has to have a half that is (and always has been) pampered and free to experiment and come up with radical ideas, and a half that does the actual work! Selling the West into slavery might kill the goose that lays the golden egg.

    ReplyDelete
  30. @ Lemming
    The math is never wrong. Swagger and being cool is worth nothing when you're financial system is insolvent and you're running a structural trade deficit. Some of the people that are studying along with me will go to the UK after getting their Bachelor's because of its still pristine reputation and to improve their English but does that change a bit about the macro-environment? Does not.
    If you aren't careful you will find yourself enslaved inside the West, those that live in any way off the government already outnumber those that actually produce. That is about as dangerous as it gets for any democracy as it's literally close to eating itself.
    There is no need for the world to be going through such a testing time, history isn't always linear, there is nothing that holds the West higher than the East than its productive power which it is rapidly losing. I feel for everyone that is losing his job and now struggles to feed and shelter his family, unfortunately our politicians couldn't give a flying ****.

    http://www.telegraph.co.uk/finance/financetopics/recession/5304794/Money-printing-starting-to-work-says-Bank-of-England.html

    "The Chancellor will today be forced to reassure senior figures from the Chinese government about Britain's creditworthiness. The ministers, who are on an economic delegation to the UK, have expressed their concern that quantitative easing, alongside large levels of western public debt, will destabilise the world economy. Given that China is one of the biggest consumers of government debt from both the US and the UK, there are fears that the country may turn a cold shoulder on British debt in the future."


    The same Western countries that were supposed to increase the IMFs credit lines are begging China for money. An utter disgrace to lose the upper hand within such a short timespan. I am reading a book for my thesis that deals with the asymetry within US-Sino relations, it's not even a couple of years old and I can already flip the sides. I used to get out and drink almost daily until I saw with my own eyes what economic and political madness can make of a nation such as Cambodia or Laos. Now I'm almost close to using Ayn Rand's standards ;)

    ReplyDelete
  31. I think this may be Orlov's source:
    http://www.chinapost.com.tw/business/asia/b-china/2009/05/06/207042/50%25-of.htm

    ReplyDelete
  32. Escaping Eastwards, you say: "Who receives more praise in the West, the entreprenuer who builds something or the kid that damns the CO2 emissions coming from that factory?" Should we therefore pretend there is no environmental cost to the CO2 and other economic inconveniences? Even if you don't accept man-made global warming, surely you concede that environmental degradation is a real threat to economic growth and human welfare? The west may be up the creek but at least we may still have a creek in the future, rather than a dried up industrial slurry. Where are you going to escape to once all compass points are screwed?

    ReplyDelete
  33. @ MattInShanghai

    re "I tried to get to your web page, but sadly for some reason or other the PRC authorities (in their infinite wisdom) have decided to block it"

    So I've been censored in China huh? Bang goes one billion potential readers!

    The interesting/bizarre thing about that is I don't recall ever mentioning China on my blog. However I guess maybe they didn't take too kindly to my assessment of their system in a recent comment on this site. Nice to see that their Thought Police are working as hard as ever.

    Still, at least they make cheap trainers and microwave ovens, right? (Question intended toward 'EscapingEastwards' who says: "The economic track record speaks for the Chinese, that's what I'm basing my faith on.")

    re "the 40 or so years in Western societies after 1945 (admittedly after a horrific world war). During this time overall prosperity increased tremendously, as a result of a consensus between the elites and "normal" citizens"

    Yes and no.

    You're right, the period 1950-1975 was indeed the 'golden-age of Capitalism' - but only for the opposite reasons implied by this blog: this was the period of Keynesian growth and high levels of regulation which, as you point out, all changed under the gruesome Thatcher-Reagan double-act

    You're right to highlight that there was 'radical change' during this period (the civil-rights movements of the 60s, the environmental and union movements of the 70s, the global solidarity movements of the early 80s) but you'd be wrong if you are suggesting that this represented a 'consensus between the elites and "normal" citizens' - all these movements were opposed - often violently - by the state.

    Yes, there is a "consensus" of sorts (I would call it an "uneasy truce") existing in the "social-democratic societies, which "neo-liberal propaganda, agitation and arm-twisting" would ultimately seek to change (i.e. redraw the frontiers of), but I would not call Germany, the Scandinavians or France, either 'socialist' nor 'democratic' in any meaningful sense - the most generous term I could use to describe those systems would be 'State-Capitalism Lite'.

    And all this should be given with the very large proviso that the non-Western countries, i.e most of the world, did not prosper during the period discussed.

    re "The reason I mentioned commentator Steve Tierney, was that (an opinion formed on the basis of his posts and his own blog) he seems to be typical of a large and potentially influential segment of British society, which combines a natural distrust of any "radical" ideology with a sense of civic duty and practical activism."

    I know very little about Steve Tierney and have not, until recently, been following his blog, so my comments do not relate to him individually. I do however believe this: unless you believe in something, you can be persuaded of anything.

    What constitutes a "sense of civic duty and practical activism" is very ambiguous and vulnerable to manipulation by those with power. Today 'civic duty' may mean helping an old lady across the road, tomorrow it may mean painting a star on a Jewish home; today 'practical activism' may be canvassing for a political party, tomorrow it could be helping to round up asylum-seekers.

    Hyperbole? Perhaps. But let's not imagine that the German people of the late Weimar Republic were any less given to "civic duty and practical activism" in the early 1930s than the Brits are today.

    re "I'm sure that two or three years ago, during the height of the "boom", he would have dismissed the opinions expressed by our host and many of his commentators as the ravings of lunatics and conspiracy theorists. This perception is now slowly beginning to change, with the "radical" opinions becoming more and more part of "mainstream" thinking, and it is to the credit of CE and other bloggers (including a few mainstream journalists and writers) that the situation has moved in this direction

    Which only goes to highlight how capricious people living under this system truly are.

    Personally I would never underestimate the power of 'having someone to blame'. I used to think the public rage would be satisfied by being offered the heads of rich bankers, now it seems that nothing less than the whole system of representative democracy will do. Interesting times.

    (Note: Cynicus recently commented on my blog to meet the charges I put at him in a recent post; I plan on offering my own rebuttal to this shortly. Obviously this information will be of no use to you Matt, seeing as you are being 'protected' from such debate by your Chinese Big Brother. Perhaps though, if Cynicus would be kind enough to host this exchange somewhere on his site you would be able to offer your own thoughts/comments, which would, I imagine, be greatly appreciated by both sides.)

    ReplyDelete
  34. Lemming,

    I'm sure there's plenty of western engineering graduates who are rubbish too...

    It sounds like you're saying that the west comes up with all the ideas and non western countries make the great stuff that the west thinks of.

    I think countries like India and China are now producing some of the best scientists, software engineers, business leaders,engineers, etc.

    Often these people will work for western companies.

    There's an interesting statistic quoted my the Indian guy in this video...

    http://www.youtube.com/watch?v=wc4eMtAqcvo

    Don't know if its true but he said something like 90 percent of phd science graduates from the top american universities are of asian/indian origin.

    ReplyDelete
  35. @ Tiberius said...
    >>I know very little about Steve Tierney and have not, until recently, been following his blog, so my comments do not relate to him individually. I do however believe this: unless you believe in something, you can be persuaded of anything. <<

    Its all very well saying your comments do not "relate to me individually", but then going on to make statements after mentioning me.

    It's rather like saying "no offence intended.." and then being extremely offensive.

    You are quite right, you clearly dont know me at all. I can assure you there are plenty of things I believe in. Your comments seem to suggest that if somebody does not share *your* beliefs then they "don't believe in anything."

    I also don't appreciate being the introduction to a couple of paragraphs that lead down to talk of nazism. If you knew me at all you'd realise how ridiculous that is.

    I don't want to hijack CE's thread with stuff about me. If you want to take issue with anything I say, my own blog is the place to do it.

    I apologise to other readers for taking up space which is better used discussing CE's ideas and post.

    ReplyDelete
  36. @Anonymous 1.03 pm (and Escaping Eastwards)

    "I think countries like India and China are now producing some of the best scientists, software engineers, business leaders,engineers, etc."

    In some people's eyes, doing things 'by the book' unerringly, makes you "the best". But who writes "the book" in the first place?

    I can't quite put my finger on it, but it may be that the original industrial nations found that formal examinations were a valid way of testing engineering students as the culmination of an overall educational 'culture', but that subsequent imitators then extrapolated from that into believing that simply training to pass the examinations was the same thing.

    ReplyDelete
  37. @ Steve Tierney

    I assure you no offence was intended.

    I put, as you quoted, "my comments do not relate to him individually" to move the debate away from you personally,to the subject that Matt had introduced to the thread (i.e. ideologically-neutral, 'normal people').

    You're right, I did go "on to make statements after mentioning" you, but only because I had more to say on the topic. If you would have preferred that I had closed that comment and opened a new one to highlight the discontinuation I can only apologies for not doing so; as I say, no offence was intended.
    re "I can assure you there are plenty of things I believe in. Your comments seem to suggest that if somebody does not share *your* beliefs then they "don't believe in anything."


    My comment was intended to address the ""radical" ideology" that Matt mentioned and, once more, did not pertain to you as an individual. On rereading I can see how you could have drawn that conclusion as my punctuation was unclear (at least one missing 'new line'): again, my bad.

    "I also don't appreciate being the introduction to a couple of paragraphs that lead down to talk of nazism. If you knew me at all you'd realise how ridiculous that is."

    I'm sure it is.

    "If you want to take issue with anything I say, my own blog is the place to do it."

    I have no issue with anything you have or have not said Steve, and I hope we can move on from this.

    Best Regards,

    T.

    ReplyDelete
  38. Apology absolutely accepted. I probably jumped the gun and was overly critical. So I apologise in return for being too quick off the mark.

    ReplyDelete
  39. Back on topic... Main Stream Media has THIS to say (somewhat belatedly)

    http://www.spectator.co.uk/business/coffeehouse/3592736/the-alarming-trends-surrounding-quantitative-easing.thtml

    ReplyDelete
  40. A brilliant post CE.

    Can I also add my thanks to those posting interesting links. I found this site through a recommendation and can also recommend the archdruid blog.

    For those of a slightly more 'left' (if that means anything any more!) perspective Larry Elliot at the Guardian is writing some great stuff

    http://www.guardian.co.uk/business/2009/may/10/neo-liberalism-labour-policy-larry-elliott

    ReplyDelete
  41. Hi CE,Two great posts.
    I feel that the investment banks are gambling with our money(TAXES)that we have not even earned yet.
    They are driving a false bull run,to suck in Mr Average so they can pull out with a nice profit and sit back as the markets crash again.
    I had an E Mail from an investment house yesterday advising to sell your mothers to get in on this bull run.How sick are they??
    These banks are not lending to businesses so what are they up to??
    Please please dont get sucked in

    ReplyDelete
  42. Hi CE,Two great posts.
    I feel that the investment banks are gambling with our money(TAXES)that we have not even earned yet.
    They are driving a false bull run,to suck in Mr Average so they can pull out with a nice profit and sit back as the markets crash again.
    I had an E Mail from an investment house yesterday advising to sell your mothers to get in on this bull run.How sick are they??
    These banks are not lending to businesses so what are they up to??
    Please please dont get sucked in

    ReplyDelete
  43. @ Tiberius

    I'm sorry that my off-the-cuff ramblings have led to a little spat between you and Steve T (thankfully you two managed to settle your differences very quickly). I should have been more precise, but that usually means extra verbiage.

    When talking about "ideological" vs. "non-ideological" attitudes in people, I did not mean to imply that "non-ideological" people do not have beliefs. What I meant was that people who subscribe to a particular "ideology", whether it is neo-liberalism, libertarianism, Marxism, Objectivism, Scientology or whatnot treat their "system" as a one stop shop for all answers about the Universe, meaning of life and so on. It is entertaining to watch the mental contortions that a dedicated ideologue will go through when faced with inconvenient facts. The really consistent ones will happily accept absurdities (and in the final reckoning - atrocities), as long as their faith in the system can remain intact. I remember watching a video of Rothbard (the famous "Austrian" economist) explaining to his audience that the Progressive movement in the US at the turn of the XIX-th century, which led to the first anti-trust legislation (and among other things the breakup of the Standard Oil cartel) was actually a secret plot, hatched by the US government and Rockefeller to distort the market and impose a monopoly on the American people (since according to the Austrians, monopolies are impossible in a "free market", and if they happen, it is always the government's fault).

    Committed ideologues gaining power is **the** nightmare scenario for any society. One only needs to look at the "achievements" of such diverse ideological groups as the Bolsheviks in Russia, the Nazis in Germany, the Maoists in China, the Khmer Rouge in Cambodia and to a lesser extent the influence of the "Chicago Boys" on what happened during the last 30 years in the West and elsewhere.

    Thankfully, most people are not "ideological" in this sense. This does not mean that they don't have strong beliefs, just that these beliefs do not have to cohere in a single consistent framework. And yes, they are capricious, can often change their minds, can be manipulated, but in many ways they still have a better grounding in reality, than fanatical, brainwashed zombies, who would rather die, than accept that their Emperor is human, not divine. And of course, there is the danger that historical events may cause "decent, normal" people to indulge in atrocities (this is the standard "defense" of the Germans for their conduct during WWII). But think about it - fascist and nazi-like movements existed in almost all European countries in the '20s and '30s (including Britain), but only achieved their full destructive power in Germany (I'm simplifying a bit, but one can argue that the various nazi-like regimes in some of the smaller European states were the result of German influence, occupation, or threat of occupation). The Germans were actually a very "ideological" people, with a long-established cult of militarism, nationalism, deference to state authority, an inferiority complex, an attachment to order and discipline, unlike the other major nations in Europe. That cultural baggage might explain their collective behavior better than simply putting it down to thoughtlessness and lack of beliefs.

    I agree that my term "consensus" may not be a happy one and prefer your term "uneasy truce". And of course, the prosperity of the post war years was entirely due to the Keynesian reforms which took place (and often violently opposed by elite groups). Keynes himself explicitly stated that his goal was to "save capitalism from itself". But the reason why these reforms were adopted, was that the elites were genuinely afraid that the system would collapse as a result of social unrest and general loss of faith in it. The loss of faith, I might add not among the British Communist Party cadres, but the "fickle, capricious, non-ideological" majority of the populace.

    It is too early to say whether the current crisis will lead to radical changes in our societies, or will be papered over, for another decade or so by various accounting tricks, and new Ponzi schemes. Time will tell...

    Best regards

    P.S. I don't think your blacklisting by the PRC authorities was personally directed at you. Since just before the Olympics, some sites (the BBC, Wikipedia, etc.) were (and still are) "unblocked", on the other hand they went after proxy servers, and a random, constantly changing, list of sites, with no rhyme or reason behind it. I think (currently) all "worldpress" addresses are blocked. I will try to check periodically if the situation changes.

    ReplyDelete
  44. @MattInShanghai

    I share your view that an "absolute" ideology really is the path to ruin.

    For instance, I consider myself "something of a" Libertarian. But there are things I believe in which 'absolute' Libertarians cringe at.

    I'm a free-trade advocate, but I really don't think 'absolute' free trade would work. I know many think markets alone can deliver the world. I accept they can deliver a lot, but I think they lack understanding of the "human element" we have all been talking about here, recently.

    In every case, having some ideologies as a 'guide' is, I feel, a good thing. Thinking they are the 'law' is a bad thing. There is just no replacement for a little old-fashioned common-sense in most circumstances.

    ReplyDelete
  45. Here is an illustration of the network in action: http://www.ft.com/cms/3cf2381c-c064-11dd-9559-000077b07658.html?_i_referralObject=4754237&fromSearch=n

    ReplyDelete
  46. @MattInShanghai

    Thank you for your reply, I found what you said very interesting and have to admit to having played around with it in my head a lot over the past two days.

    I agree with all you said on the distinction between"ideological vs. non-ideological" and your statement that this should not imply that the later group of people do not have beliefs.

    What I'm not sure I agree with is the following:

    "Committed ideologues gaining power is **the** nightmare scenario for any society."

    What about "democracy", "human-rights", "propert-rights", etc? Are these not all forms of ideologies? Would someone commited to these concepts be considered and 'ideologue'? If so, would an ideologue with such a disposition really be a "nightmare" for any society?

    This is the point I was trying to (very clumsily) make before. I'm not so sure the absence of 'ideology' in the way you define it is, necessarily, a good thing. If people lack the central narrative to their lives they become, I think, more succeptible to those in power proving this 'meaning' for them.

    At the risk of offering an analogy that I'm not sure works: the opposite of a theist is not an agnostic but an athiest.

    Personally, I don't have a problem with people being ideological, at least you know where you stand with them. I think the greater danger comes from a nation of blank-slates.

    T.

    ReplyDelete

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