The Bear’s Lair: Housing bubbles are universally destructive

Ever since this column started in 2000, I have been writing that British house property is hopelessly overpriced. There is no question this has been spectacularly bad investment advice – Londoners who owned a home in 2000 have at least trebled their money since then, doubling it in real terms. Nevertheless, it is possible for an asset to remain overvalued for decades, and I would like to examine the damage that overpriced real estate has done to Britain’s economy. Continue reading

The Bear’s Lair: The happy new world of tariffs

As President Trump imposes tariffs on China and elsewhere, much dark muttering is heard from the media and conventional economists about Smoot-Hawley and the 1930s. They are too gloomy. Two factors have changed since the 1930s: bloated government and the invention of computers, and their combination means that the Victorian dream of universal free trade is no longer optimal, even if it ever was. By upending conventional economic thought, Trump may well have improved the human condition. Continue reading

The Bear’s Lair: Learning the right lessons from 2008

Learning the right lessons from financial crises is tough. The 1929 stock market crash was blamed for all the ills of the Great Depression that succeeded it and led to two decades of regulation and socialism. In 1720, the British tried to stop all new company formations while the French gave up on finance altogether and started plotting revolution. So, it is unlikely that we have learned the right lessons from 2008, but it’s worth asking what lessons we should have learned, to avoid the same mistakes again. Continue reading

The Bear’s Lair: The Marie Antoinette economy

The Financial Times this week reviewed yet another adulatory biography of John Law, the financier/swindler/Keynesian responsible for France’s Mississippi Company disaster of 1716-20. Meanwhile the Congressional Budget Office published a suitably gloomy study of the budget cuts needed to stabilize U.S. public debt. With a massive financial crash coming, an inability to finance the government’s needs thereafter and social attitudes heavily favoring the destructive over the productive, 21st Century America increasingly resembles 18th Century France. Hopefully its fate will be less bloody! Continue reading

The Bear’s Lair: The delusions of infrastructure

President Trump is wise in many things, but he has two economic beliefs that are irredeemably foolish: low interest rates and infrastructure. To the joy of die-hard Hillary-lovers, I now propose to criticize one of those two beliefs: that in infrastructure. By and large, it is thoroughly overpriced currently, and very often yields far more costs than benefits, as examples around the world can show. Continue reading

The Bear’s Lair: De-FAANGing the world

Last weekend, Ben Carson’s Department of Housing and Urban Development filed suit against Facebook, claiming that its methods of segregating consumers for advertisers constituted redlining, violating Civil Rights legislation. The battle between Big Data and civil rights has thus begun, rather earlier than had been expected. It is just one of the forces that will ensure that the 2020s will be the decade of the FAANGs’ eclipse, not of their final triumph. Continue reading

The Bear’s Lair: The secular stagnation of Keynesian economics

Larry Summers recently reiterated his assertion that we are in an era of secular stagnation, suggesting in a new paper that low interest rates and an aging population may have caused this. However, the U.S. economy has recently shown substantial signs of growth, which appears sustainable. If President Trump can restrain his enthusiasm for low interest rates, Summers and his neo-Keynesian colleagues may definitively be proved wrong. Continue reading

The Bear’s Lair: China’s coming Austrian collapse

“The coming collapse of China” has been predicted many times. Indeed, an excellent book of that title was a best-seller back in 2001. Yet the fictitiousness of Chinese economic statistics remains, and the over-leverage in the economy worsens. Like several other successful non-market economies, China has successfully sought rents from other countries through flaws in the global economic system. Thanks to President Trump, that is now changing, and the result for China will not be pretty. Continue reading

The Bear’s Lair: Take the half-loaf Brexit, then come back

Teresa May’s Chequers Brexit proposal is a pathetic thing, which will doubtless be made more pathetic by Brussels before next March. Yet the crucial factor is momentum. Once even a Chequers-Brexit has taken place, Britain will be separated from the European Union, the “Remainers” will no longer have an option to offer and Britain will be able to enter partial trade deals with other countries. Brexiters should take their half-loaf on March 29, 2019, unattractive though it is, knowing that time and momentum will enable them to work for more. Continue reading

The Bear’s Lair: The corporate governance model is broken

John Schnatter, founder of the solidly profitable Papa John’s (Nasdaq:PZZA) was forced out last week for using a naughty word, while Elon Musk remains CEO of the eternally loss-making Tesla (Nasdaq:TSLA) despite tweeting one. The last three decades have supposedly made massive improvements in corporate governance. Well, whatever that is, it doesn’t seem to work in any rational fashion. Continue reading