The Bear’s Lair

The Bear’s Lair: Back to Stuart finance!

Since this column appears on the 413th anniversary of Guy Fawkes’ attempt to blow up the Houses of Parliament, I thought it worth reflecting on why he got so close. The principal reason was the parlous state of early Stuart finances, which was due to two factors: the lack of a central bank and the […]

The Bear’s Lair: 24 years of Schumpeter

The Sears bankruptcy, and the Schumpeteran creative destruction in the shopping mall sector that will follow, feels like it has been coming for a long time – and it has. Ever since the Fed went off track from sound monetary policy in February 1995, ultra-low interest rates have created new unproductive investment and postponed necessary […]

The Bear’s Lair: Competition is good for governments, too

It is a well-known economic principle, the central thesis of Adam Smith’s work, that competition between individual businesses produces better outcomes, while monopolies and oligopolies result in inefficiency and conspiracies against consumers’ interests. From the economic principles involved, the same is also true of governments. We should thus welcome nationalism and deplore both movements towards […]

The Bear’s Lair: The costs of consensus

In many areas, such as monetary policy, the U.S. Supreme Court, corporate Boards of Directors and Cabinet government, decisions are made by arriving at a group consensus. If the group is sufficiently intellectually diverse, this works well. There is however a pernicious danger, which we have seen in action many times in economic policy, where […]

The Bear’s Lair: Towards the asset-light economy

The last two decades of low interest rates have seen a vast increase in the world’s stock of assets, measured at market value, largely matched by a corresponding increase in debt. However, the increase has not raised global productivity growth, which has slowed as the asset glut has increased. This points to a core economic […]

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 […]

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 […]

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 […]

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 […]

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 […]