The Help To Buy “Time Bomb”

The classic definition of madness is doing the same thing over and over and expecting a different result each time.

British Prime Minister David Cameron seems very chuffed that his new Help To Buy Scheme is seeing such a large number of applicants right away. But I wonder if this isn’t another financial ticking time-bomb that’s set to go off, in a similar (if not smaller) manner that the last housing-related bubble went off?

Why is there this obsession with making people “home-owners”, foresaking decent economics in the process, even when those decent economics can steer you clear of a financial meltdown?

Buy all means, build more homes if there’s a market for them. That might curb prices and make a mortgage more economically viable. But when the government uses the banking/lending system as another tool for social engineering, you get, well, you know, what happened last time.

Some interesting views on this in the Backbencher, which is always well-worth a read.

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Why Libertarians Win. Always.

Matt Ridley - The Rational Optimist

Matt Ridley – The Rational Optimist

I’m currently re-reading Matt Ridley’s incredible book, the Rational Optimist. It’s another timely reminder that it’s very good to be a libertarian right now. In fact, being a libertarian has put you on the right side of history and reason since the dawn of mankind.

What’s great for libertarianism, is that in the 100,000 year-or-so history of our breed of hominids, we have been winning the moral and factual argument in the real world. Our brand of reality is actually the real one, not merely the one that we’d like in theory to exist. Conservatives and modern so-called ‘liberals’ (I prefer the term ‘socialist’ or ‘social democrat’ to describe them) cannot – and have never really been able to – say the same thing.

The moment homo sapiens first evolved from their homo dynamicus ancestors, we started to learn the relative value of trade (i.e. I value item A but I value item B a tiny bit more. For you, it’s the other way around, so we trade on mutually beneficial terms). In countless tests, our gorilla, chimp, bonobo and orang-utan cousins can’t pull off the same trick. None of the hominids before us could quite do it either. Our brains were about the same size as our father-species. We were weaker and not necessarily smarter than the neanderthals. But this understanding of trade was what separated us. It’s what made us the sucess we are today.

And on it goes. Everywhere around the world, at an ever faster rate, the human race is living in an increasingly freer, happier, and more beautifully hyphenated and mongrelised world. Almost everything is getting better all the time. Or to state it differently, almost everything is getting more libertarian all the time.

In fact, the only significant area where we seem to be losing the argument, is in the size and scope of the government. In the West, it appears that the unproductive sector is getting increasingly larger relative to the size of the productive sector. But libertarianism, like gravity, is a fact of life. And it will only be a matter of (possibly prolonged) time before this one minor blip in the libertarian road is finally paved over. The size of government will eventually have to come down, just as every aeroplane that has ever taken off has eventually had to land.

The only real question is, will it be an orderly, rational and safe landing, or will it be a “brace for impact” kind of affair?

I hope everybody comes to their senses long before we have to prepare for a bumpy fall to earth.

Ron Paul’s Farewell Speech

A sad day, but an inevitable one. Here’s Congressman Paul, stumbly, awkward but totally true:

Good bye Ron, we’ll miss you in that grand old chamber.

EU vs Commonwealth – Where Should Britain’s Future Lie?

This is from Daniel Hannan’s superb blog on the Daily Telegraph website, just look at these graphs:

 

And this one too:

Any way you choose to look at it, the Commonwealth’s growth is about to exceed that of the European Union/Eurozone. Again, I’m all for open free trade with our European neighbours, but by cutting ourselves off from free trade elsewhere, haven’t we shackled ourselves to a corpse? And how is having a trade agreement with one group of countries at the explicit expense of others free trade? That’s just protectionism…

 

The “Anglo-Saxon” Approach was not to Blame for this Mess

My local MP John Redwood has, in four basic points, eviscerated the myth that laissez-faire light touch regulation (or the so-called “Anglo-Saxon Approach”) was responsible for the banking crisis:

1. The European banking system is in a worse mess than the UK or US systems today. There is no evidence that the EU, Spaniards, Italians, Greeks and Germans suddenly fell in love with “light touch Anglos Saxon regulation” and made the same mistake, yet they ended up with more weak banks.

2. The volume of regulations expanded substantialy during the build up of the boom. The EU came into the game and added many pages of new financial regulation at their level, on top of all the extra regulations the UK and US authorities were issuing. The UK was governed by a left of centre administration which believed in the efficacy of more regulation. The FSA reviewed all past banking regulation and added to it.

3. The authorities themselves were enthusiastic proponents of the easier credit they allowed under their myriad of new detailed regulations. In the US a Democrat President promoted more mortgages to people on low incomes as a social policy, which led directly to the junk loans which jeopardised the system later. They called the crisis the “sub prime” crisis in honour of the loans advanced by mortgage banks and by a couple of state financing arms that were fully nationalised in the crisis. The UK government ran up big bills paid for by off balance sheet transactions called PFI and PPP in the spirit of the lend more age.

4. The UK administration was particularly keen on promoting the growth of Northern Rock, a North Eastern company, and RBS,a Scottish company, as they grew very quickly. They took pride in the huge expansions of their balance sheets, and in the way they used off balance sheet vehicles to speed their growth. In the good days these were northern and Scottish companies showing London and the south how to run modern banking and financial services.

I wonder if we’ll ever be able to put this myth that laissez-faire is to blame to bed for good? Sadly, I doubt it…

Small Is Beautiful

From those very studious chaps (and chapesses) at the Centre For Policy Studies, they’ve made this great simple Iittle video to show, in broad strokes, how smaller governments (all things being equal) perform better than their bigger government counterparts. Enjoy:

 

 

More Reasons Why America is Doing Better Than the UK

It’s simple, it’s not that the US has a left-wing administration that’s increasing “investment” and the UK has a right-wing administration that’s imposing “savage cuts”. Okay, Obama has increased spending (and things would have gotten better faster if he didn’t) but overall, spending is down in the US (mostly because of the majority of state and local governments have been sensible).

In the UK, spending is still increasing. Certain departments have had cuts, but every single month of this coalition government has increased. And you combine that fact with our higher taxes, more authoritarian government and more centralised control, well, you see what you get. A mess.

And why has America done better? The New York Times explains all, with the help of this graph:

It’s the states wot’s won it, but the subsequent dip in unemployment and improving economy are going to be very useful to Obama in the forthcoming election…