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09:25 - GOLDMAN SACHS´ RECORD PROFITS - A BAD SIGN:
Goldman Sachs´ record $3.44 billion profit has been welcomed as a sign that the crisis is about to end. But as Wall Street Journal points out, it is probably a sign that all the new government guarantees and bailouts have distorted tha banks´ incentives even more. It´s now in their interest to take enormous risk because potential losses can be sent to taxpayers:
"Goldman´s traders profited in the second quarter from taking advantage of spreads left wide by the disappearance of some competitors (Lehman, Bear Stearns) and the risk aversion of others (Morgan Stanley). Meantime, Goldman´s own credit spreads over Treasurys have narrowed as the market has priced in the likelihood that the government stands behind the risks it is taking in its proprietary trading books...
So for the moment, Goldman Sachs -- or should we say Goldie Mac? -- enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong. We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business."
The most market-friendly solution would be to abolish guarantees and prepare a process for seizing and winding down failing giants. But if that is not possible, WSJ want to restrict proprietary trading done by guaranteed financial entities, or to introduce a bailout tax for those deemed too big to fail, so that those institutions would have to pay for the privilege themselves.
00:10 - MICHAEL MOORE WITHOUT THE LAUGHS:
I just read an attack on free markets that was even less impressive than the average anti-globalisation pamphlet. It´s terribly pretentious, but its strong, sweeping statements about the destructive role of markets and globalisation are never backed up with any evidence or statistics. It´s Michael Moore, without the laughs.
The text complains about poverty, without mentioning that poverty has been reduced everywhere where there has been economic freedom, and when it has to admit that some progress has been made in poor countries, it trivialises, mocks and even opposes the biggest poverty reduction in mankind´s history:
"In poorer areas some groups enjoy a sort of ´superdevelopment´ of a wasteful and consumerist kind which forms an unacceptable contrast with the ongoing situations of dehumanizing deprivation."
Instead it presents the usual complaint that free trade and institutional competition results in a race to the bottom, without presenting any new research to back it up:
"These processes have led to a downsizing of social security systems as the price to be paid for seeking greater competitive advantage in the global market, with consequent grave danger for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social State."
And part of the solution is said to be government intervention, forced redistribution and more power to trade unions, without ever analysing how these institutions have often undermined freedom, creativit and living standards.
But as I indicated, there is no reason to take this text seriously, because it just contains statements, and no arguments, statistics or research to back them up. Perhaps that´s because the writer relies completely on divine inspiration. It´s Pope Benedict XVI, in his Enclyclical Letter Caritas In Veritate.
It´s fitting, don´t you think, that the Pope combines his bizarre, reactionary thoughts on social issues with this unsubstantiated, reactionary attacks on free markets?
17:16 - KREATIVITET, INTE KVANTITET:
"Vad gäller USA:s undergång så kan man konstatera att detta inte är första gången den har förutspåtts. Först skulle Japan ta över världen, sedan Indien och nu Kina. Det man då glömmer är den oerhört entreprenöriella kultur som finns i det stora landet i väst. I princip samtliga nya helt revolutionerande affärsmodeller de senaste 20 åren kommer från USA.
Amazon, Google, Dell, Wikipedia, Ebay, Itunes, Iphone, Facebook, Twitter, alla dessa företag har skakat om branscher i grunden. Listan är ändlös. Landets kultur att uppmuntra entreprenörskap och att hylla framgång är ett recept som slår billig tillverkning och många högskoleelever många gånger om."
- Mats Qviberg ger oss hoppet om USA åter, i Expressen.
08:09 - PERSPEKTIVSKIFTE:
"Det får nästan alla andra göra", säger Lars Ohly när han tycker att kronprinsessan borde fixa sin bostad själv. Det är klart att hon borde, men varför sluta där? Ohlys "nästan" behövs därför att en grupp som slipper fixa är riksdagsledamöterna. Låt även dem fixa sina bostäder (övernattningslägenheter i Stockholm) själva, så skulle de nog snart införa en rimligare bostadspolitik.
09:59 - $288 000 000 000 TO DESTROY FOOD TRADE:
In another eloquent and intelligent speech Barack Obama says that he wants Ghana - and the rest of Africa - to get rich by be exporting food.
Talk is cheap.
The 2008 $288 billion US Farm Bill that Obama supported is expensive.
14:50 - BAD TIMING:
Do you wonder what happened to the US stimulus money? It´s slowly working its way through the political process and the economy so that it´s ready to stimulate and overheat the economy when it´s already improving.
Only 47 percent of the highly stimulative spending (only about 40% of the total package, the one with Keynesian multiplier effects) will be spent by the end of fiscal year 2010. A year later, more than a quarter is still not spent, according to the Congressional Budget Office.
08:29 - IMMIGRANTS AND CRIME:
Ok, the time has come to speak candidly about immigration and crime. American studies shows that there is a clear correlation: Immigrants are less likely to commit crimes than native-born. This is true for the nation as a whole, for cities with large immigrant populations and for cities along the US-Mexican border, as Radley Balko explains in Reason.
One reason is that immigrants have an important stake in society, and the costs of losing that is too large. That also points to another possible correlation: Crime is low as long as immigrants are welcome and can integrate into the economy. But if the signs say "Italians Need Not Apply" (as they did), they might have nowhere to go but into crime. So a Europe that is less welcoming and has a more regulated labour market might also turn more immigrants into criminals
It´s not you, it´s me.
(Thanks Johan)
11:52 - SWEDEN IN THE ECONOMIST:
In The Economist this week Charlemagne is impressed by Sweden´s combination of free markets and welfare state, and says that if Zurich were crossed with Sydney, you would get Stockholm (he picked a good, sunny week to visit). When explaining why Sweden works relatively well he turns to some thoughts of mine, and a forthcoming Cato essay that I have written on the subject:
"Sweden’s big state works because it is Swedish, not because it is big, says Johan Norberg, a liberal economist. The country has had an efficient bureaucracy for 200 years. The public sector expanded only in the 1950s, after a century of astonishing economic growth driven by free trade and free markets (from 1850 to 1950, average incomes multiplied eightfold, as a poor peasant society was transformed into one of the world’s richest countries)."
It would be hard to object to that (apart from the attempt to make an economist out of me).
11:02 - POWERPAREN :-):
Jag är inte bara gift med en förtjusande kvinna. Tillsammans har vi tydligen en hel del makt också...
10:43 - KONSERVATISM I MELLANMJÖLKENS FÖRLOVADE LAND:
Roland Poirier Martinssons korståg för konservatismens fortsätter, nu på DN Debatt, där han påstår att kristdemokraterna skulle kunna bli större om de blev mer konservativa. Men trots en påkostad opinionsundersökning och en rad fokusgrupper har Poirier Martinsson inte lyckats visa så mycket mer än att de flesta svenskar är emot daltande med brottslingar, för välfärdsstaten och arbetslinjen (och snusexport!).
Om det är konservatism så är det en "vi-gör-som-vi-alltid-gjort-och-tycker-aldrig-något-som-stör-bordsdamen"-mellanmjölkskonservatism och det täcks väl redan ganska väl in av fyra-fem partier med 80 procent av väljarna bakom sig (inklusive kd). Poirier Martinsson redogör inte för några siffror som tyder på att svenskar vill hindra aborter, missgynna alternativa familjebildningar, betona kristendomen i politiken mer el dyl.
Det är möjligt att kd skulle vinna på att bli mer antiliberalt i kultur- och livsstilsfrågor, men det finns inget i denna artikeln som ger stöd för den tron.
07:47 - MARY POPPINS AND THE US POSTAL SERVICE:
As you might have noticed from my absence I have left for Summer - I am on the west coast for my brother´s wedding and now on my way to the music festival in Arvika. But after I left Stockholm, The Economist´s Charlemagne travelled there, and was impressed by the public services: If it is a nanny state, it is a Mary Poppins nanny state.
I offer my own explanation: Bureaurcatic competence was there first, and that´s the reason why Swedes could get big government to work relatively well (relative to other countries). More government in the US would not get them a big version of Sweden, it would get them a big version of the US Postal Service.
And if you want the historical reason for Sweden´s exceptionalism I think that in a small, homogenous country without feudalism and invaders, people who became part of the bureaucracy didn´t see themselves as belonging to a more exclusive group with privileges, and people and voters never expected or allowed them to.
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