The Holy Roman Empire was a pioneer in banking through the Fuggers, it had adequate constitutional protections for at least the middle classes, and it benefited from fabulous German engineering talent, so why didn’t it get the Industrial Revolution? Its main problem was internal tariffs; we are told that in the 18th Century there were 32 toll houses on the Rhine and 35 on the Elbe. The Empire’s failure to overcome that problem despite its enormous costs for its economy has lessons for us facing similar entrenched inefficiencies today, which are equally regarded by us as part of the natural order. Continue reading
The Bear’s Lair: The long-term effects of Covid-19
Four months after the Chinese-origin coronavirus impinged in a big way on our lives, it is finally becoming clear that it is not going away, and that the world will have to take account of it and its future cousins for many years to come. Accordingly, the world economy and life in general will suffer some major changes. The future will be very different from what we had imagined, obviously for the worse but in just a few respects for the better. The quicker we adapt, the better. Continue reading
The Bear’s Lair: Even German regulators are useless
Following the discovery of fraud at the German payments processor Wirecard, the media are asking how German regulators can be so clueless. That is the wrong question. If anybody can make regulation work Germans, precise, efficient, un-corrupt and indomitable can do so. So, the problem must be, not that German regulators are inept, but that regulation as a whole cannot catch fraud. As 2008 proved, it cannot catch sophisticated cutting-edge scams, either. So wouldn’t we be better off without it? Continue reading
The Bear’s Lair: Private equity and hedge funds are bad investments
An Oxford-Said Business School study this week demonstrated that private equity returns have not been higher than public equity returns over the lengthy period since 2006. Similar studies have shown that hedge fund returns, theoretically not correlated to equity returns, have also grown increasingly inferior. Since both types of investment have created new billionaires from nowhere, we are forced to ask: what in heavens name do pension funds and other investors think they are doing investing in them? Continue reading
The Bear’s Lair: Defund the colleges, not the police
There has been a cry among the college-educated left this week to “defund the police.” For normal citizens, especially those living in big cities, that is a terrible idea – the crime rates of the 1970s and 1980s are not something they want to return to. However, it is clear that much of the unhappiness and unrest among Millennials and Gen-Z derives from the problem that there are now more college graduates than what were traditionally considered “college-level jobs.” If we are to defund something, therefore, would it not make more sense to defund the colleges? Continue reading
The Bear’s Lair: To cure inequality, run the economy better
We have heard a great deal about excessive inequality in the United States, which has among other things been used to justify the recent rioting. Historical comparisons however show that inequality is not especially high by the standards of the past, though it has certainly risen over the last thirty years. Yet the solution to inequality lies not in more regulation, higher taxes and socialism, but simply in less rubbishy economic policy. Continue reading
The Bear’s Lair: Knee-jerk government actions prolong recessions
Governments and central banks worldwide have responded to the Covid-19 epidemic by massive doses of monetary and fiscal stimulus. Little of the money thrown at the problem has done any good. However, the further economic distortions governments have caused will have one long-term effect: they will delay and enfeeble recovery. Ever since 1929, government actions have prolonged depressions; you would think by now they would have learned better. Continue reading
The Bear’s Lair: Government should give up its ESG activities
The Business Roundtable last year made a stir by claiming that business should no longer maximize shareholder value, but instead respond to ESG (environmental, social and governance) concerns. Skeptics, including this column, pointed out that capitalism was not designed to run on that basis, and would fail if it was adopted. However, the coronavirus response has highlighted that government as well as business needs to be run in the interest of its “shareholders” the voting public, and that the fewer ESG policies it adopts, the better. Continue reading
The Bear’s Lair: Tech and Covid-19 free us from squalid cities
The Covid-19 crisis has brought an outbreak of despair from the world’s commentators. They forecast a huge economic downturn (hoping it will rid them of President Donald Trump) and moan about the limitations the disease has brought. But the same commentators celebrated the obviously flawed globalist economy, as it dragged us into ever more loathsome global cities. Now tech and the disease have liberated us – to live in villages, where humanity is most comfortable. Continue reading
The Bear’s Lair: Will the U.S. adopt Argie-nomics?
The U.S. is currently projected to run a budget deficit of $3.8 trillion, about 19% of GDP, in the year to September 2020, according to the Congressional Budget Office. Meanwhile interest rates are held flat at zero, and the Fed is beginning to purchase junk bonds to provide “stimulus.” We are in uncharted waters – or are we? There is a country that has intermittently pursued policies like this ever since 1944 – Argentina. That country’s past may well be our future. Continue reading