The Bear’s Lair: Time to close down the CDS market

This week, we learned that a hedge fund and the credit default swap (CDS) market had pushed a regional telecom company, Windstream Holdings Inc. (Nasdaq:WIN) into bankruptcy. The toxic CDS product caused havoc in 2008, and regulators have been their usual ineffectual selves in failing to grasp it since. There is no legal way to make CDS legally watertight, and Wall Street lacks the expertise to manage the product’s risk exposure. It’s time to close this casino down. Continue reading

The Bear’s Lair: Senator Rubio’s first good idea

Senator Marco Rubio (R.-FL.) is not a favorite of this column – he is much too fond of open-borders projects and his child tax credit was a waste of government money. But his latest idea, a tax on stock buybacks, looks well designed to remove most of this plague on U.S. corporate finance and the economy in general. If we are to avoid a very nasty recession, it should be passed as quickly as possible. Well done, Senator! Continue reading

The Bear’s Lair: Ben Bernanke killed the world economy

This column has contended for several years, based on empirical data observations from several countries, that low interest rates worldwide were killing productivity growth. A University of Chicago paper finally provides some academic back-up for this contention and suggests a mechanism through which it takes place. There are other mechanisms also, and I would suggest that the Ben Bernanke-inspired wild monetary experimentation from 2008 on has done more damage to the world economy than any other initiative in the history of mankind. Continue reading

The Bear’s Lair: Bureaucrats grinding the faces of the poor

The OECD recently published a paper on taxation and economic development that claimed that the propensity of poor countries to tax less than rich ones is a contributor to their poverty. Thus, by raising taxes to Western levels, they could develop their economies. This view is not surprising from an organization of international bureaucrats, but it is the reverse of the truth. I thus thought it worth setting out the correct picture. Continue reading

The Bear’s Lair: Will Britain 2019 follow Czechoslovakia 1948?

It appears increasingly likely that the British people will be forced into a “People’s Vote” re-running the Brexit referendum of 2016. For those of us around during the Cold War the term “People’s Vote” has a familiar ring, similar to the “People’s Republics” and People’s Democracies” of Communist tyranny. This therefore begs the question: is Britain in 2019 to suffer the same fate as Czechoslovakia in 1948? Continue reading

The Bear’s Lair: The decline of good economics

William Hogarth - Gin Lane

There are many reasons why the Industrial Revolution happened in Britain in 1775-1850, but among the most important is the quality of economic thought among British policymakers of that period. Adam Smith, Thomas Malthus and David Ricardo gave them an excellent grounding in free market economics, and few statesmen of that period opposed their doctrines. Alas, over the last two centuries the quality of economic discourse has steadily declined. Spurious economic theories have appeared, and statesmen seem determined to avoid the correct ones. Continue reading

The Bear’s Lair: The decay of property rights

New York Mayor Bill de Blasio claimed last week that there was plenty of money for his pet projects, but it was “in the wrong hands.” In response, the Wall Street Journal, supposedly the voice of capitalism, gave a turgid list of rich New Yorkers’ charitable donations while blasting the inefficiencies of de Blasio’s administration. Both sides are wrong; in a well-run system, property rights should be inviolable regardless of what owners do with their property. That’s tough to defend when funny money has unfairly rewarded speculators – yet another reason to return to sound policies. Continue reading

The Bear’s Lair: Getting to Brexit in a naughty world

As I write, the key vote on Theresa May’s quasi-Brexit deal with the EU is set for January 15. This column has previously advocated voting for May’s deal on the grounds that it offers the most certain progress towards Brexit, but the European Commission has booby-trapped it, so that there is a chance of Britain being marooned in a hellish twilight limbo, half-in and half-out. On the other hand, honest, rational Brexiters are far short of a majority in Parliament so if May’s deal fails, there will not just be dirty work at the crossroads, but dirty work all over the landscape. This column thus attempts to advise on tactics, in a world even naughtier than usual. Continue reading

The Bear’s Lair: Heaven preserve us from a flat world!

Thomas Friedman’s 2005 best-seller “The world is flat” asserted that we were moving inexorably towards globalization and that barriers to trade and people movement were disappearing, as would many aspects of sovereignty. It is now clear that this process produces a political reaction, in which ordinary people protest vehemently against the flattening of their planet. We should rejoice: a flat world would be a tyranny, and the bumps in our current planetary economic system are all that protects us from this nightmare. Continue reading

The Bear’s Lair: Looking forward to Dow 11,000

It has been a bad December for the stock markets, but pundits across the land are predicting a recovery in the new year from this terrible drop. Short-term market fluctuations are unpredictable, but the reality remains: owing to decades of funny money the market has got far ahead of its equilibrium value, which is now around 11,000 on the Dow, half the present level. It is worth examining what a world with Dow 11,000 will look like. Continue reading