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By Steven Baker MP, on 13 November 10
This post originally appeared on stevebaker.info.
Today, Cobden Centre comrades and I are off to inject some Austrianism into the Positive Money conference. As you can tell from the Cobden Centre’s literature page, we are not afraid to work with other schools of thought — there are significant areas of overlap.
For example, from the conference home page:
Does the fundamental design of the banking system automatically lead to an unstable, unproductive, unfair and unsustainable economy and society? If the answer is yes, then should we take the opportunity to truly fix the problem now, or simply make superficial changes and start saving up for the next bailout?
This is, of course, very much where I am coming from. However, there is a hint of anti-capitalism about the conference page, something which I hope to contribute to overturning.
The fundamental problem is, after all, the state: state monopoly, state planning, legal privilege, the socialisation of risk and the privatisation of profit. What is wrong is that we have the appearance of capitalism without the correct institutional architecture.
What we have is corporatism.
By Steven Baker MP, on 1 November 10
October 2010 was our best-ever month, with over 24,000 hits.
Our top five downloads are:
Visitors came from most of the world but the top five countries were UK, USA, Canada, Spain and Germany. Courtesy of Google Analytics for the year to date, our visitor locations:
 All in all, quite satisfactory.
By Steven Baker MP, on 31 October 10
Yesterday, I gave a talk at the Libertarian Alliance Conference 2010 entitled Honest Money and the Future of Banking. Please click the image below for the slides.
Video footage of my presentation will be available shortly.
By Steven Baker MP, on 13 September 10
On CentreRight, I explain that Douglas Carswell leads the way on bank reform:
There is a doctrine which creates wealth and spreads it around. It is just and moral. It works. It is called capitalism and, today, in practice, there is very obviously something wrong with it.
If one were to summarise the doctrine of capitalism in one word, it would be “property”. It is property which enables human social cooperation through production, exchange and consumption. The voluntary exchange of property has rules and these are known as contract.
These two concepts, property and contract, are fundamental to capitalism and yet, in relation to money held on demand in bank accounts, they are applied at best inadequately.
On Wednesday, immediately after Prime Minister’s Questions, Douglas Carswell MP will be introducing a moderate and conservative ten-minute rule bill which would introduce sound property rights and contract to monetary deposits. It is potentially of profound importance and I am delighted to support him.
Read the rest of the article, including a range of relevant links, here.
By Steven Baker MP, on 8 September 10
This post originally appeared on stevebaker.info.
Dan Hannan and Ruth Lea have launched the EU Referendum Campaign:
The EURC is an organisation that is determined that every adult in Britain should have the right to choose whether our country should be a politically independent self-governing country or a member of the European Union.
With the EU now making the vast majority of laws we must obey and with new plans to take control over the tax and spend policies of its member countries, the British people must be given the right to decide where ultimate political power lies: In Brussels or with our elected parliament.
Unless we win the right to vote on Britain’s membership of the EU within the near future, our democracy is in danger of falling under the total control of the Brussels elite and disappearing for all time.
For the Telegraph, Dan writes:
The question, these days, is not whether referendums are compatible with representative democracy, but what the next one will be about. If we are allowed a vote on how to elect our MPs, why not a vote on whether those MPs run the country? If we can have a referendum on whether to have a mayor in Hartlepool, what about one on whether the majority of our laws should be handed down from Brussels?
Read more here.
By Toby Baxendale, on 31 August 10
Not many people are aware that on the 5th of April 1933, the US citizens were instructed to deliver up all their gold (money at the time) to the Federal Reserve and get less in purchasing power back. This confiscation of wealth would make even Emperor Nero or Henry VIII blush with its boldness.
Congressman Ron Paul has always campaigned for the Fed to open its books and have this gold counted as there are rumours that all of it is not there. An open audit would settle the matter. The Fed refuses. You can draw your own conclusions from this.
I reader sent this link to me:
By Michael O’Brien – 08/30/10 10:21 AM ET
Rep. Ron Paul (R-Texas) said he plans to introduce legislation next year to force an audit of U.S. holdings of gold.
Paul, a longtime critic of the Federal Reserve and U.S. monetary policy, said he believes it’s “a possibility” that there might not actually be any gold in the vaults of Fort Knox or the New York Federal Reserve bank.
The libertarian lawmaker told Kitco News, a website tracking news about precious metals, that an audit was necessary to determine how much the U.S. maintains in gold reserves in case the government were to use gold to back the dollar.
“If there was no question about the gold being there, you think they would be anxious to prove gold is there,” he said.
“Our Federal Reserve admits to nothing, and they should prove all the gold is there. There is a reason to be suspicious and even if you are not suspicious why wouldn’t you have an audit?
“I think it is a possibility,” Paul said when asked if there was truth to rumors that there was actually no gold at Ft. Knox or the New York Fed.
Paul had been one of the Republicans to spearhead a broader audit of the Fed as part of the Wall Street reform bill passed through Congress this year. The provision, which was weakened somewhat in the final version, found Paul joining with a number of Democrats to require the Fed to open its books and outline its assets and liabilities.
The gold reserves, which Paul’s new bill would audit, are generally seen as a guarantee on a nation’s currency, but the U.S. moved the dollar away from being tied to the price of gold in 1972.
Paul stopped short of calling for the reinstitution of the gold standard and instead called for the government to allow the use of hard currency — gold and silver tender — alongside the use of the dollar.
“If people get tired of using the paper standard they can deal in gold or silver,” he said.
Desperate times lead to desperate measures and on a side note, I wonder what is being planned now. I remember being told at the start of my business career by a wise old multi millionaire, “remember, when the banks or the government need money, they can only come after you if you have money,” i.e. they can’t confiscate what you do not have.
By Toby Baxendale, on 30 August 10
A reader has sent in his thoughts about the recent proposals to reform the regulatory apparatus of the UK banking system:
Last Friday I had a quick view at the report by HM Treasure on a proposal to reshuffle the institutional setting for financial system regulation and oversight in the UK. The introduction (4 pages) is interesting but sometimes depressing. It openly recognised that UK authorities (Bank of England and FSA) failed to see the problems coming and to react adequately. Good. However, the solution it proposes is not to improve the understanding of the building up of bubbles and imbalances, or to reinvigorate the political will so it can make decisions even if those affect the banking status, or to stop trying to achieve the unachievable (a big apparatus able to foresee everything in the system as a whole), but… just rearranging chairs… (every one else in the world, G20, ECB, FED, is rearranging chairs too, so this reshuffling is quite mainstream). However, maybe in the case of the UK there is a possibility to introduce sound thinking in this new Bank of England-based structure (and stop the endogamic kind of thinking within current monetary authorities), through the external members of the newly created “Financial Policy Committee”. The report says (p. 17) among other things:
2.43 It will be important to ensure that the external members of the FPC are able to provide sufficient levels of expertise and challenge to the Committee’s deliberations – this will not only include experience of banking, but also other financial sectors such as insurance and investment banking and, of course, macroeconomic expertise.
2.44 In addition to the chief executive of the CPMA, the Chancellor will appoint four external members of the FPC using a similar recruitment process to that used for the MPC. The Government will look carefully at the best way to ensure that external members demonstrate ample relevant knowledge and experience and the ability to work constructively in a committee environment, without conflicts of interest that would prevent them participating fully in the work of the Committee.”
My take on this is that the external members of the FPC have to be radically different in make up than the internal members of the current MPC i.e. usually a academic, or some who has come from that background. Entrepreneurs, great business leaders and representatives from the SME sector , all who operate at the coal face would have more of an idea about what is and is not actually going on in the economy, better still, why not think about reforming the whole system anyway so we do not rely of 20 or so central planners to determine the value of our very currency, arguably with language, the foundation of civil , peaceful society.
Above all, if we are only tinkering and not radically reforming, he concluded “please appoint those WHO DID SEE it coming and who have a sound theoretical framework behind it (and kick out those who were clueless…)”
Bravo to that, we can name a number of Austrian School economists and Austrian influenced fund managers and entrepreneurs who could do this job.
By Toby Baxendale, on 30 August 10
http://www.npr.org/blogs/money/2010/08/26/129451895/how-to-spend-1-25-trillion
Cranky money policy or real economics?
Is this the start of the decline of the American Imperial Empire we are observing?
By Steven Baker MP, on 30 August 10
Via Bank plans to cap risky mortgages – Telegraph:
Mortgage lending would be “capped” to stop borrowers taking out risky loans under radical Bank of England plans to prevent a repeat of the credit crisis, a senior official has disclosed.
But why did borrowers wish to borrow so much, so riskily? And why did lenders wish to lend so much, at such risk?
In the first place, credit has been too cheap for too long. Low interest rates are bound to encourage people to borrow more and save less. Therefore, people saved less and borrowed more. This was the result of the Bank of England’s decisions.
House prices kept rising because people kept borrowing and pumping money into housing. Housing was excluded from the Bank’s measure of inflation, so rates stayed low.
The appearance of inevitable and uninterrupted house price rises gave the impression that we were in a new era within which the old rules did not apply: borrowing caps could be raised to excessively risky levels and borrowers could rely on price increases to deal with the capital.
Lenders used models which fundamentally understated risk. For example, markets do not behave within the Gaussian or “normal” distribution: extreme events happen more often than a normal distribution predicts. Furthermore, the risk of mortgage default correlates across similar mortgages when the economic environment changes. Still, the models said risks were lower than they were, so more credit could be extended.
Since the lenders were neither, on the whole, mutuals or partnerships with open-ended liabilities and since the employees making the decisions shared only in the upside, there was insufficient motivation to manage to the true level of risk.
Moreover, securitisation of mortgage pools and so forth palmed off the risk onto hapless investors who probably trusted the risk models and the market environment created by excessively cheap credit. And, “Hey, look at the returns!” The personal touch was missing from the relationships between borrowers, ultimate lenders and intermediaries, further corrupting the system.
Of course when the pantomime ended, the taxpayer was forced to pick up the bill. And still bonuses were paid in bailed-out banks!
Now, having created the boom with cheap credit and moral hazard, the Bank plans, not to fix the root problems, but to pile intervention upon intervention…
There is much else to be said, for which I recommend The Alchemists of Loss and Money, Bank Credit, and Economic Cycles. However, on the face of it, the Bank’s present proposals merely extend the infantilisation of the financial services sector.
Later this week, I will indicate ten serious plans for financial reform.
By Steven Baker MP, on 19 August 10
 Following his introduction to Mises, Dr Eamonn Butler has released his latest book, Austrian Economics – A Primer. I recommend it strongly if you want to grasp the fundamentals of the Austrian School of Economics as quickly as possible: at just 118 pages, this pamphlet can be tackled in one sitting.
With Keynesian-inspired policies which ‘spend your way out of recession’ clearly not working, the Austrian School provides a better explanation for recent events than more ‘mainstream’ thinking, whether Keynesian or Monetarist.
Over the course of the book, Eamonn explains the Austrian view of the importance of human agency, values and knowledge in shaping the markets, that is social cooperation. Vitally, it explains the origin of the present cycle of boom and bust: the government’s cheap credit policies, which encouraged people to borrow and discouraged saving, creating an artificial boom that inevitably ended.
For many years, the Austrian School of Economics has been sidelined, but it’s great to see that it is now rising in popularity as people become increasingly critical of the way governments and central banks have handled the economy.
Butler’s systematic and simple yet comprehensive primer is a great addition to a stable which also includes The Austrian School: Market Order and Entrepreneurial Creativity by Jesus Huerta de Soto. While Huerta de Soto’s first-class book is perhaps aimed at a more technical audience, Butler has made the Austrian School highly approachable. A strength shared by both works is to be measured and inclusive where “Austrians” can be confrontational.
Eamonn has made a superb job of outlining this important school of thought and his book should prove a great success. You can buy it here.
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