Quite

The bail-out should have been a legal bail-in whereby equity is wiped out, and all bank debt is written down. Then unsecured (uninsured) depositors ie above €100,000 should have taken a double digit hit. By doing this EU finance ministers and lawmakers would have been respecting the creditor hierarchy while adhering and honouring the rule of law. The retrospective change of law is what should alarm us all. The insidious and subtle nature of this encroachment on our civil rights sets an ominous precedent and those who glibly mock libertarians for their ‘rants’ are no doubt those same people who thought PIIGS really do fly.

29 thoughts on “Quite”

  1. Tim, have you updated Word Press to the latest 3.5.1 version?

    Tim adds: Yes, this is it. And it’s causing the problems I think.

  2. The Troika has run roughshod over the rule of law. By calling for a universal bail-in of depositors (the securest part of bank capital ladder) before extracting money from shareholders, junior and subordinated bondholders, the EU bureaucrats and IMF have unilaterally ripped up the legal framework for property rights. This is a truly worrying and frightening progression – actually regression – in economic freedom.

    The basic problem being that banking “governance” (i.e. institutions like the IMF) are not interested in general economic wellbeing, but in sustaining their own system, and under that system, currently, governments are beholden to them. None of this is going to get fixed until the banks are forced back into the market economy rather than being tasked with “managing” it.

    In another thread, Surreptitious Evil said us crazy libertarians are demanding things that cannot be achieved; and I replied that if those things are unachievable it is pointless trying to fix things because the necessary tools are not available. Either we have a comprehensive monetary reform, or we carry on in failure mode. That’s the choice.

  3. “The retrospective change of law is what should alarm us all.”

    That is what I’ve been trying to explain to our man with the crayons, though sadly he isn’t equipped to grasp the point, simple as it is.

    The law may be an ass, and by all means campaign to change it, but arbitrary and sudden about-turns on political whim are horrifying.

  4. Just because the political meddling in the banking system is crap and, as Ian contends, may have actually broken the risk / reward balance in the system (cf ‘moral hazard’), in no way implies or excuses fundamental breaches of the law.

    I’ll note that I didn’t call libertarians ‘crazy’. I called Ian un-pragmatic.

    Suggesting that the only possible solution is something that would be wholly unacceptable to the voting population and would be hideously difficult to achieve even if everybody was fully behind the concept isn’t helpful. Even if you are right.

  5. SE-

    I’m not sure how much of the voting population have any sort of understanding of, or interest in, the central banking system, but (a) it’s pretty small and (b) those who do are generally monetary reformists (Libertarians, Free Silver Populists, NWO Conspiracists etc).

    Do you really think teh people would refuse to countenance ending crippling interest payments on an escalating national debt? I think that’s a pretty easy sell, myself.

  6. Meanwhile the UK government is currently trying to enact retroactive legislation to avoid paying back benefits that the High Court has just ruled that they are obliged to pay. Presumably that’s the sort of retroactive legislation everyone’s OK with?

  7. Here is hoping the WordPress demon has been sufficiently pacified …

    Presumably that-s the sort of retroactive legislation everyone-s OK with?

    Where did you manage to get the impression that anybody on here would be happy with any retroactive legislation? Well, except Arnald of course – he’d cheer for anything he was conned in to thinking would ‘advance the cause’ 🙁

  8. Do you really think teh people would refuse to countenance ending crippling interest payments on an escalating national debt? I think that-s a pretty easy sell, myself.

    But that is just one effect of what you are proposing. You are cherry picking …

  9. SE-

    Well, not sure what other effects you think I’m proposing. In general, I’m proposing a free market banking system and an end to inflation as national policy.

    It is worth remembering that the Lombard Street central banking model has only become ubiquitous in the past century (America didn’t get the Federal Reserve until 1913, when they were already a highly successful capitalist economy) and we didn’t switch to a pure fiat until 1971 (Nixon) so really what I am proposing (and it is pretty much vanilla Austrian School stuff here) is reversing an unsuccessful radical reform, rather than introducing a radical reform.

    Banking is an important service in the economy, but the current model is in meltdown. It doesn’t work. What more negative effects would a return to market banking produce, compared to the chaos we’re currently witnessing?

  10. Would I be right in thinking this is yet another instance of there being a reasonable safety net that would protect a large amount of savings that simply hasn’t been allowed to work? My impression being that the wealth tax seeks to avoid the banks going under so the deposit protection scheme won’t be triggered.

    If so then these proposals are deeply unpleasant but not retrospective and not in conflict with the deposit protection scheme.

  11. Ian,

    You are confused. Theory is deliberately simplified and you appear capable of understanding neither that the world is not a nice binary division into good things and bad things nor that even if what you proposed was ‘right’, you have absolutely no chance of achieving it.

    Well, not sure what other effects you think I-m proposing.

    You are, sighs, cherry picking just one effect of your proposal and saying “I could get people to support this”. Fine, you probably could. Unfortunately for your legacy as the financial saviour of the universe (displacing the not-particularly Honourable Member for Kirkcaldy from that plinth) abolishing central bank fiat money is going to have more than one effect.

  12. Starting to look like the whole thing’s going to fall over anyway.
    What’s that Chinese curse?

  13. Well of course it’ll have more than one effect, that’s the point of it.

    I don’t get this. I’m “confused” and think in “binary”? The world isn’t divided into “good” and “bad”? Well, these aren’t answers to what I propose, they’re just dismissals.

    Look, somebody says, “the NHS is not a good system, let’s try another one, e.g. private insurance, or vouchers, or something”. THey’re dividing good and bad, by your definition. But they’re just proposing a change because the current thing, in their opinion, is not as good as another thing would be.

    You haven’t bothered to say why switching back to a free banking system would be so bad; you’re just slagging me off. That’s not an answer, is it? There is a lot of good economic theory that says why the current system would be dysfunctional in much the way we seem to observe. You’ve also re-purposed what I said from a general-

    “I think that’s a pretty easy sell, myself.”

    to a personalised-

    “I could get people to support this”

    so you could imply some megalomaniac desire upon my part to be “the financial saviour of the universe”. Which is just plain dishonest.

  14. IanB,

    It is generally considered incumbent on the person proposing the radical change to provide a plan and evidence that the change is both required and a good one.

    You do neither.

    You insist that every body else allows the most favourable reading of everything you right yet get on your high horse when ever any response to you is not the most pendantic.

    You show absolutely no sense of humour.

    Are you Ritchie’s Austrian twin?

  15. SE-

    I’ve got a pretty good sense of humour. I just think you were deliberately distorting what I said for rhetorical effect.

    I’ve written shitloads in comments here about economics. I can’t be expected to write a book in every comment box. Come on.

    We can start with my assertion that the current system is dysfunctional. Is that an unfair assessment?

  16. It could be argued, after this monumental fuck up, the onus is on the current system to justify itself.

  17. I-ve written shitloads in comments here about economics.

    Most of which boil down to “IanB’s interpretation of the Austrian School of economics is the one, the true and the only way.” And are never justified beyond that, except when you insist that as a small businessman, you are the only person on here who is allowed an opinion.

    It could be argued, after this monumental fuck up, the onus is on the current system to justify itself.

    I’m not so sure the German government see this as a fuck up. Maybe it’s just a trial run?

  18. Most of which boil down to “IanBs interpretation of the Austrian School of economics is the one, the true and the only way.”

    Oh come on. Every comment and utterance on the internet has an implied “in my opinion” preceding it, and likewise everyone offering comment or polemic is effectively saying “I think that I am right and that the thing I am arguing against is wrong”.

    And are never justified beyond that, except when you insist that as a small businessman, you are the only person on here who is allowed an opinion.

    And this is silly. The only reason I’ve recently brought that up was due to “Interested” sneering at my being variously a plumber or a porny cartoonist, and thus to answer him by pointing out that I’m selling my skills on the free market while he’s dependent on a State backed cartel, so he’s in a glasshouse throwing stones.

    I am really not much interested in discussing myself. I’m interested in economics and politics. Because they affect my life. The dysfunctional banking system in particular affects us all. But am I to take it that nobody outside that system is entitled to an opinion? We just suck it up, do we?

    So, stop talking about me and address, for instance, whether you think the current financial model is dysfunctional or not. And if so, whether it might be an idea to try something else like, say, free markets. I thought people round here were in favour of free markets? Or is it just other people who are supposed to suffer the rigours of market forces and the risk of business failures and job losses? Hmm?

  19. I am really not much interested in discussing myself.

    You’re entirely right. You’re not interested in discussion just in polemic.

    And if so, whether it might be an idea to try something else like, say, free markets. I thought

    I’m surprised.

    people round here were in favour of free markets?

    Well, okay. Maybe not. You see none of the ‘discussion’ we’ve been having has been about free markets. It’s been about the utter impracticality and the naive simplicity of your solutions. Your concept is more ‘free market’ than the current situation.

    You have provided nothing to evidence either that your concept is better or that there is a reasonable way to transition from where we are to where you want us to be.

    Way back in the history of the internet (yesterday?), I seem to remember referring to the Irish traffic directions joke. As a ‘still to demonstrate that you are not a humourless git’, you probably missed this.

    Or is it just other people who are supposed to suffer the rigours of market forces and the risk of business failures and job losses?

    Oh <a href="https://www.google.co.uk/finance?q=LON:RBS&ei=3SBKUbC2PMaGwAP3Qw&quot😉 my (I’d recommend the 5 yr view) effing God. You really do live in a little bubble, don’t you.

  20. Tim,

    Come on, please. If we are going to do the proper internet thing and contribute links to evidence (and an ‘insert link’ button isn’t appropriate for some reason), a preview feature so we can check our handcrafted HTML would be really useful.

    Thanks …

  21. thus to answer him by pointing out that I-m selling my skills on the free market while he-s dependent on a State backed cartel, so he-s in a glasshouse throwing stones.

    That’s a statement you have repeated and that he has denied. Evidence rather than more repetition please.

    Disclaimer – between about 2000 and 2006 I did indeed work for a bank. Mostly as the head of the imbecility prevention department or, as I usually described it when introducing myself, “the Gestapo”. I clearly didn’t do a good enough job – probably because we were more than a little squeamish not just about the mass murder thing but also about the fingernail. Excuses could be provided over a beer.

  22. “Only a fool would abolish Gosplan! Who would plan production?! Would you have the chaos of unbridled capitalism?! Comrades, this man is a kulak!”

  23. So Much For Subtlety

    Surreptitious Evil – “Suggesting that the only possible solution is something that would be wholly unacceptable to the voting population and would be hideously difficult to achieve even if everybody was fully behind the concept isn’t helpful. Even if you are right.”

    It depends on your frame of reference. Everyone is ignoring the traditional Latin response to the present crisis – a military coup.

    Suppose that Greece et al all had their militaries step in. As they would have until recently. Would that be wholly unacceptable to the voting population? Sure. Would it be hideously difficult to achieve fiscal discipline? Absolutely. But it didn’t stop the Greek Junta from doing precisely that. It didn’t prevent Salazar’s regime from leaving Portugal solvent despite the war in Africa.

    Is it helpful? Well, the EU is trying their own civilian version of it. Replacing elected governments with aparatchiks from the Eurobanking system. Doesn’t seem to work. Let’s see if they get around to a Caudillo in the end anyway.

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