The Bear’s Lair: Is the West adopting China’s model?

Under Xi Jinping, China has moved away from its previous mixed economy to one in which all major decisions are taken by the state and are subject to the Five-Year Plan. Business leaders must toe the party line, while foreign investment is allowed into the country only on terms that involve ceding most intellectual property to Chinese interests. All media are censored, payment systems are used for a controlling “social credit system” and rebellious spirits are liable to find themselves in a labor camp. Continue reading

The Bear’s Lair: The decade of debt restructuring

The 1930s saw a major global recession and a decade of debt default and restructuring, sovereign, corporate and personal. The 1970s saw a series of mild recessions, accompanied by inflation; debt defaults and restructurings were far less severe. Today we are likely due for a recession of uncertain length and depth (though unlikely to match the U.S. 1930s) and inflation that seems likely to match the 1970s. However, for structural reasons I shall explain, the pattern of debt restructurings seems likely to resemble the 1930s rather than the 1970s. Continue reading

The Bear’s Lair: World central banks are wimping out

The Fed’s decision this week to hold the Federal Funds short-term interest rate at the 5.25%-5.50% range mirrored recent actions in other central banks worldwide. That is a pity; inflation is by no means conquered yet and real interest rates are well below their levels of the United States in 1969, the last time interest rates began to take off and reached current levels. As predicted in this column for two years: central banks worldwide are wimping out before they have conquered inflation — which means we will have it all to do again, while inflation and interest rates will rise much further in the long run. Continue reading

The Bear’s Lair: A property franchise would work better.

We have just seen what is probably yet another failure of universal suffrage, admittedly in Argentina, where such failures have been themselves universal. The reformist Javier Milei, who had a good handle on the pretty robust reforms Argentina desperately needs appears to have been defeated by the government Peronist, who assisted his campaign with massive government handouts (sending the country further bankrupt) and was swept to power by the shirtless and propertyless mob in Buenos Aires. One man, one vote does not work. One man, one vote with the left stealing all the close elections works even less well, but election security is a separate albeit important question. Continue reading

The Bear’s Lair: Suffolk Bank beats Bankman-Fried

Two groups of people from elite backgrounds, Boston merchants of the early 19th century and Stanford professorate alumni of the early 21st century, founded institutions that made important changes to the U.S. financial system. Yet the financial institution founded by the Boston merchants played an important stabilizing and constructive role, while that founded by Stanford alumni was intrinsically destabilizing and ended in a record-breaking disaster. The structural differences between an unregulated yet sound financial system in the early 19th century and an over-regulated yet utterly unsound one in the 21st century explain the differences in outcomes. Continue reading

The Bear’s Lair: The further right, the better

Janan Ganesh, in a recent Financial Times column, described Britain as “Europe’s haven from the hard right.” In doing so, he crystallized why the last 13 years have been ones of gentle, increasingly annoying decline. In all Western societies, policy is bedeviled by a kind of creeping “woke” socialism representing the centrist consensus; that brings only accelerating decay. As a believer that the correct governing policy is the Toryism of Lord Liverpool, never fully followed since the Tories lost power in November 1830, I posit the “hard-right” or “far-right” is thus the only way of escaping this morass. Continue reading

The Bear’s Lair: Investment crowds are mad, not wise

Kabosu, the Shiba Inu dog made famous by the cryptocurrency Dogecoin, died recently at the age of 18 – a good run for even a famous dog. Dogecoin itself is far from its April 2021 market capitalization of $50 billion, although its current $8.8 billion ranks it a very respectable ninth on the cryptocurrency league table. A new movie “Dumb Money” celebrated the GameStop/ Dogecoin retail-driven stock and crypto- boom of 2021; a blistering review by hedge-fund manager Clifford Asness in the Wall Street Journal denounces the movie vitriolically, mostly for its assumption that amateurs could beat the “People who have spent their entire careers committed to the practice” of investing. However, institutional investors have always underperformed the market on average and the “wisdom of crowds” is generally wrong. It is worth trying to explain why. Continue reading

The Bear’s Lair: The Boadicea approach to cities

Boadicea and her Daughters

Boadicea and her DaughtersSource: Paul Walter

Boadicea, Queen of the Iceni, burned Londinium to the ground in AD 61 – we can still find a layer of oxidized iron in the geological record attesting to her success. While Londinium was not a big city by modern standards – its population was probably about the same as today’s Poughkeepsie, with the same crime problem but not such good restaurants – Boadicea’s valiant action should nevertheless be a model for us today. The reality is that big cities are destructive of both economic value and civilizational values, and one of the few advantages of modern technology is that we can now avoid creating them or living in them. Continue reading

The Bear’s Lair: Can Javier Milei save Argentina?

The Peron Justicialist

The Peron JusticialistSource: Czajko

Javier Milei, a libertarian economist favored to win next month’s Argentine election, was interviewed by Tucker Carlson last week. After proclaiming his adherence to Milton Friedman and Friedrich von Hayek, Milei announced that there should be no public sector layoffs initially, instead allowing the economy to recover before laid-off bureaucrats had to seek work. Bad mistake! – the same one that doomed his center-right predecessor Mauricio Macri in 2015-19. As I shall explain, the correct approach to Argentina’s problems is very clear; it will however require truly god-like levels of fortitude to achieve it. Continue reading

The Bear’s Lair: What should we do with higher education?

The current U.S. and British education systems are increasingly dysfunctional. Far too high a percentage of the population has been bullied into attending college, with very little benefit in most cases and with costs that have escalated several times faster than inflation or even incomes. The faculty and administration of top colleges are increasingly isolated from the political outlook of their fellow citizens – and increasingly unconstrained in forcing their warped worldview on the untrained youthful minds in their care. Fortunately, help is at hand, from online learning and artificial intelligence. These will revolutionize both learning and job possibilities, forcing change that may allow us to cut down to size both colleges and their costs. Continue reading