Timmy Elsewhere

Your editorial (11 March) is correct in insisting that the economist and philosopher Adam Smith used “invisible hand” only once in The Wealth of Nations: to discuss investing at home or abroad, not as a general description of economic structure.

If the capital is invested at home, the decision to do that being purely a selfish and personal one, then, as if led by an invisible hand, this benefits the domestic economy.

Which is true, so we’d better be careful about deterring investment at home through the confiscatory taxation of either the wealth or the profits from having benefited the society by investing at home.
Tim Worstall
Senior fellow, Adam Smith Institute, London

Then again, it might not. Maybe.

Trump In Venezuela Isn’t About The Oil
No, really, despite the usual screaming

Someone’s been messing with President Donald Trump. The Donald is stating that Ukraine will use their very valuable rare earth deposits as security for the military aid that the United States will provide. The problem is that Ukraine doesn’t have any valuable rare earth deposits.

Rest at The Critic…..

If we believe there’s something, that reification, responsible for our problems, then we’ll think that we can change that one thing and all will be well. Control the markets, do something to the bond vigilantes.

But when we properly understand this, we then realize that in order to change the outcome then, we have got to change the individual decisions of millions of people. That’s something rather more difficult to do centrally, by the law, or press releases, or shouting at people.

In order to change all those millions of decisions we’ve got to change what we’re actually doing.

Say, borrow less money. Which we could do by spending less or even taxing more. Or we could agree to pay the higher price for the borrowing if that’s what we want to do. But because there is no single actor changing prices against us, there is no single person, or reification, that we can blame.

This is true of this specific example but it’s also true more generally. “The market” isn’t a thing. It’s the considered opinion, expressed by their actions, of everyone else out there.

If you don’t like those market prices then it’s those considered opinions that need to be changed. Or, of course, you just have to put up with those prices that result from the accumulated wisdom of everyone else out there.

A little forelock tug at BiS who makes this point so often.

Cardiganistas

A coterie of Hampstead dimtellectuals is insistent that other people are just earning far too much money. To give an example of their political leanings – if Hampstead and dim isn’t enough – they seem to be mostly retired Guardianistas looking for something to do in their cardigan years.

Imagine the character defects that would lead you to spending your golden years shouting at those getting above themselves, eh? For that is what they’re doing.

The groupuscule of the Cardiganistas is the “High Pay Centre”. Which occupies itself by insisting that people who get paid a lot should not get paid a lot. Because, well, they shouldn’t.

That I’ve had a go at him elsewhere.

Youse guys should probably sign up there anyway.

In Singapore the patient is the customer. More than that, the patient is the customer waving real cash money at the people thinking about treating them. As people like cash money, the patient gets treated in a manner that leads to the money flowing to the people doing the treatments.

Yes, it’s that foul idea of treatment not being free at the point of consumption. Except that foul idea does lead to what is seemingly desired — a joined up health care system that treats people efficiently.

But, as above, spending is largely made up of permanent funding streams. Which aren’t things that will be usefully funded over time by an entirely unreliable tax source, those hugely variable earnings of the 1 and 0.1 per cents. Californian politicians have looked at European social democracy and found that it is good. But they’ve failed to learn the tax lesson. You cannot buy tax funded presents for all by only taxing the rich. You have to tax everyone, European style – eyewatering VAT rates, payroll taxes, substantial middle class income taxes. European taxation systems are less progressive than that of the US for this very reason – that’s how you fund social democracy. For the incomes of the rich, therefore the revenues to be got from taxing them, are highly variable. As they’re also finding out, raising the rates to make up for it just means those rich, and their businesses, depart for Texas.

That new place, The Critic:

The usual diagnosis about this number flatlining the past 15 years is that economic policy has been wrong. There are claims of austerity (which there hasn’t been, but whatever), of underinvestment, of Tories simply being bastards. Given that I used to work for Nigel Farage, I’m willing to believe the last of whatever it was that “Call Me Dave” thought he was doing.

Sadly, the model used by the government to decide this was produced by an organisation that used to have Richard Murphy on the board. Therefore, obviously, the answer is no.

What we want to know is whether government spending upon the renewables transition makes us richer or not. Therefore we need to use a model that is equivocal – or possibly even neutral – about the effect of government spending. Only if we start from the point that government spending is neutral can we then go on to ask whether government spending on windmills (or, to be less perjorative, the green transition) is beneficial. This is a piece of logic that should be obvious but sadly does need to be spelt out.

That’s because the model that is being used here assumes that government spending grows the economy. The results gained from the model do not, in fact, distinguish between spending upon green or upon anything else. The effect is purely driven by that original assumption: that more is better.

We do not just desire windfall and excess profits, we positively lust after their existence: for the shortages that cause them get solved by their appearance. The cure for excess profits is excess profits. Those windfall numbers are exactly what generates the change in production that increases supply, the very thing that brings profits, and prices, back down again.

As a think tank number cruncher myself I’m willing to slide over the manipulations about inflation and so on – it’s very difficult indeed to consistently produce outrage if you have to be wholly and perfectly truthful all the time. But getting the actual driving forces of the most successful socioeconomic system ever, this free market capitalism, wrong is more than just smoothing the edges or being a bit careless, isn’t it?

In the same DC Thompson papers that publish little big sis too.

He who smelt it dealt it

No, Elizabeth Warren, inflation is not corporate price gouging
If evil capitalists were stiffing ordinary Americans, they should at least show a profit

At the Telegraph again.

Can you tell that a mate got a job there*?

Getting back to US banking, Dimon may well be right and it would be nice if he were. But the truth or not of his proposition is not based on any objective facts about the world out there. It depends purely upon whether we believe him. Or not.

For all banking, everywhere and everywhen, is a con: and like any con it only works if we have confidence in it.

*Not quite how it works, a commissioning editor is like a capo, he has his consigliere. When the comed gets a new gig then the cons get pulled along….

There are a number of different minerals we can get rare earths from – xenotime, bastnaesite, monazite and so on, but those are old school. The important source is called “ionic clay”. This is what China gets many of its rare earths from. In fact most of the really fancy magnet metals all come from China and from this mineral. You can get lanthanides from other minerals in other places, but it’s a lot more expensive.

We used to think – until maybe two years ago – that only China had ionic clay. That’s why we were all stuck with their control of the market. They had the cheapest, richest (much the same thing in mining) deposits. If we were going to break free, we’d just have to have subsidies so that suppliers outside China could compete on price.

That map is positively glowering crimson at us. One might conclude, naively, that whoever runs for the Republican party next time around is going to waltz home.

Of course the instant response from the Left-wing consensus, convinced that Biden would vanquish Trump in 2024, goes something like “land doesn’t get to vote, people do”. And it’s true, there aren’t all that many people in Flyover Country. That’s why the Republicans don’t romp home every election. The big population concentrations are on the coasts where being a Democrat is a socially acceptable perversion.

So much is well known: but in fact, in a presidential election, it’s not quite true that people vote and the land doesn’t.

We seem to have designed our governance system to require those Rolls Royce minds and then staffed it with Trabants, which isn’t we feel quite the right way around to be doing it. We’d prefer something so simple that even a papier mache two-stroke could manage it then stick the bright people into those positions.

And now for the real, real problem

OK, so who else has done this? That’s what is collapsing bank stock prices across the markets and country. We don’t know who else faces such problems. Those Hold To Maturity losses don’t have to be declared as they happen. They’re not subject to mark to market. Except in one juddering change, when they might be.

There are rumours out there that there are $1 trillion of such losses inside American banks. Rumours only, I hasten to add. And the stock problem is not just that we don’t know whether that is true, but even if it is, we don’t know where they are.

As investors, what now?

As depositors we’re fine. If the Administration, Treasury and FDIC all tell us that depositors are safe, then they are. But stock, well, that can still go to zero even as that is true. Bonds can also be more than a little weak in such circumstances.

There is a way to try to get a clue. Here’s the SIVB 10-Q – on page 13 we get an idea of the holdings of “investment securities”. And that’s the thing we’ve got to do. Haul through these filings for each bank and try to work out whether they were long tenor (i.e., long-dated bonds, which then suffer greater price falls as interest rates rise) or not.

Well, you know, good luck. But that is also what all stock analysts in America are trying to do right now – work out who might have lost the bank’s capital by chasing yield in long-term bonds and who forsook earnings now for the ability to have any earnings at all in the future.

There’s no reason why we’re not as good as they are at this same task.

Which is, after all this, the game to be played.