Financial Regulators are as fallible as the rest of us

John Redwood, in defence of the banker’s, asked whether the regulator’s in the part four years has engaged in socially useless activity.

Unusually, I came to the defence of the regulator.

Regulators, even if nominally independent, work within the current political & economic climate. They would not have called for increasing capital requirements during the boom, as there was no visible reason to do so. After all, we had “ended boom & bust” – due to the prudent handling of our economy by the then Chancellor. Where was the risk factor that justified such a measure?

 If a Regulator had called for tougher rules, he would have been lambasted by the press, and criticized by most expert economists. Financial Experts would say capital requirements could be lower, as risk was now diversified throughout the global financial system.  Politicians would have said that such unilateral action would jeopardize London’s position as the World’s No.1 financial centre. If the Regulator had sufficient stature, then the £ would have gotten a bit jittery, and some shares in the banking sector would have taken a tumble. A government spin doctor would have come out we a speech saying “what I think you will find the Regulator actually said was .…” – and then say something that was the opposite, or renders the comments meaningless.

After a few days of ducking the issue, the Chancellor would have given his full support, followed the next day with the Regulator’s “voluntary” early retirement (or movement sideways).

A similar picture was with the Central Banks. By cutting interest rates after the bubble burst and again after 9/11 we obtained an asset price bubble. The US or the UK were not going to call a halt by raising interest rates, as it would have been both politically unpopular and raised exchange rates. The normal market adjustment, with a mild recession was averted. The long-term consequence was system imbalances becoming so large that the eventual correction nearly wrecked the financial system.

 The lesson to be learnt is not tougher and/or more detailed regulation. It should be a humility concerning our powers to intervene, as they can have consequences that we cannot foresee. Furthermore, markets have rushes of exuberance that will, sooner or later, be corrected. Avert the market correction and you build up trouble for the future.  Interventionism does not cure the problem of imbalances, merely delays it.


Alan Greenspan convinced everyone that he had achieved this status, but turned out, in the long run, to be wrong.

The biggest current imbalance is in the housing market. The slide has been halted by near zero interest rates, but will resume when those rates get back towards normality. Why do I say this when average house prices are around the long-term average of four times average earnings? Because interest rates are well below their long-term average for existing borrowers. When they revert to around 5% that new borrowers are paying, and when unemployment peaks at 3 million plus (with some coming from the state sector), then the supply of houses will exceed demand.

Manure dumpers a product of Climate Change Extremism

The dumping of manure on Jeremy Clarkson’s lawn is another example of using intimidation is silence the critics. Just like those who vandalise 4×4 cars in Manchester, they are the product of taking an extreme line on Global Warming.

They are the outcome of a process of

1. The emission of greenhouse gases by humans will theoretically raise global temperatures by maybe 0.5 to 1.0 degrees this century. This seems to correlate with the temperature data of the past century, though it is not a complete explanation.

2. Bodies like the UNIPCC then assume that there will be a positive feedback loop. The computer models project with that small rise in temperatures will increase the water vapour in upper atmosphere. As this is over 95% of greenhouse gas, a small increase will lead to large rises in temperature. So the forecast churned out by those models is around 2 to 4 degrees.

3. The climatologists then assume that the data collected is unbiased, is accurate and the recent warming is a unique feature. Therefore the results have a high level of confidence and explanatory power.

4. This is then dressed up with appropriate political spin and certainty. They claim a scientific consensus. whilst denouncing those who reject it as having impure motives, or being deranged, or simply people beyond the pale.

5. The seriousness of the impending climate change enhanced by dire predictions of the consequences for the human race and for other species. Probable benefits of a slight warming and higher CO2 levels are never considered,

6. The UK government (along with others) responds by setting draconian reduction targets.

7. Environmental groups, like the Green Party, look at the most extreme predictions, then say it does not go far enough and want yet more draconian targets.

8. This gives the fanatical, morally self-righteous (e.g. Green Fist, Plane Stupid and Climate Rush) who want to commit puerile acts of vandalism and intimidation, dressed up as saving the planet.

9. The perpetrators of these acts then decide to take matters further, going beyond their remit. In this case of the 4×4 vandals, slashing car tyres, instead of just letting them down.


The extreme acts are as a consequence of the extreme case portrayed in the media. We need to pause, and consider the evidence. A more balanced view would be that the case is more nuanced, and that any further warming is likely is be small.

Lord Mandleson in Denial

This country now has a structural deficit £100bn, or around 7% of GDP. To tackle it effectively will require a clear vision, a steely determination to turn things around and the leadership ability to carry a significant proportion of the public with them.

It will not be tackled by those who created this problem by running large deficit through the boom years. Neither will it be resolved by those who see reality in terms of political point-scoring to influence the next opinion polls. Nor by someone who cannot even utter the word “cut”.

The longer we leave this situation, the more likely it is that any government will be forced to cut indiscriminately to save the economy from collapse, on the instructions of the IMF. A compassionate and caring government is like a compassionate and caring GP. They diagnose effectively, and tell you straight when you have a serious problem. They then recommend the best form of treatment, administered quickly before the ailment gets any worse.


Comments by Lord Mandleson can be found at

The nature of the deficit from the BBC and Burning our Money


Comments by John Redwood, Ian Dale

Achieving a 90% reduction in Greenhouse Gases

  How soon will the following statements be made to make this goal seem achievable?

“We need to urgently switch to 80% nuclear power, like the French.”

“On your bike!”

“Frozen and chilled food should be banned.”

“Households should switch from gas to electric, despite it being considerably more expensive”

“Heating should be rationed. No thermostats above 20oC. Also “There is no real evidence that it is the winter cold that causes the mortality rates among the elderly to leap.”

“People should not live more than 3 miles from their place of work. Subsidies should be given to people to move nearer”

“People with foreign relatives and friends should only see them via video link” or “it is not racist to say that it is alright to pay a weekly visit to elderly parents who live 5 miles away, but not alright to pay an annual visit to elderly parents who live 5000 miles away.”

Alcohol – BMA gives a flawed diagnosis and dangerous prescription

Yesterday the BMA issued a report on the effects of alcohol marketing on young people. The report is flawed on two fronts.

  1. Studies that show that strong marketing for individual products is successful does not mean that this affects the overall level of drinking by young people. The BBC’s example of the highly successful Magner’s cider campaign is a case in point. The brand is a premium brand, costing around double the price of the cheapest cider per unit of alcohol. Neither would the arty and atmospheric advertising seem aimed at the youngest. It is more likely aimed at those in the late 20s and 30s who might have drunk the cheaper ciders, but are now looking for something more aspirational.
  2. An analysis of the overall data for the last century reveals alcohol consumption more than halved in Britain from 1900 to the mid 1930s. It may have been exacerbated by the First World War, but this drop was mostly due to a cultural change. Brought on by the rise of the temperance movement, the social acceptability of alcohol consumption changed. Consumption rose with the decline of the church and the liberality of the 1960s.

The current belief in bombarding young people with the dangers of alcohol and banning alcohol advertising will do little to change this. What will change this attitude is something that changes the view that the best way to have a good time is to get so drunk that you cannot remember the experience.

Douglas Carswell on Ian Pilmer’s Heaven & Earth

Like Douglas Carswell MP, I too ordered Pilmer’s Heaven & Earth following the Spectator’s article, and, like him, am only half way through.


At the half-way point Carswell point to six things he hadn’t previously known:

1.  Over the past million years, way before industrial man came along, the climate has often changed very significantly, very quickly.

2.  When climate changes, the shift is from being warm and wet to cold and dry.  Or vice-versa.  If global temperatures are rising, it’s most likely getting wetter, not drier. 

3.  Warm-wet climates are generally better for life on earth than cold-dry climates.

4.  CO2 levels have been far, far higher in the past – yet CO2 levels in the atmosphere don’t seem to have been a significant driver of climate in the past.

5.  Human activity accounts for a relatively tiny portion of global CO2 emissions.  To quote Plimer, “One [submarine] hot spring can release far more CO2 than a 1000 mW coal-fired power station”.  There are many, many thousands of such springs.

6.  Plimer suggests that the really significant drivers of climate change are the sun, ossiclations in the earth’s orbit, and volcanic emissions of sulphur dioxide.  Indeed, the 1784 eruption of Laki in Iceland put 150 million tonnes of SO2 into the atmosphere – which wiped out crops and caused famine in the northern hemisphere for a couple of years.



The major aim of the Pilmer’s Heaven & Earth is to provide to put the human influence on climate in perspective (both in magnitude and time scale), along with the limits of what we know. For instance on p.112 Pilmer says that a 1% change in the cloud cover could account for the entire C20th warming, whilst on p.115 we find that we can only measure cloudiness to an accuracy of 1%.

The broad sweep of the book is sufficient (to reasonable people) to put on hold any new policies to combat climate change. In particular any policy trying to negate runaway global temperatures. Pilmer shows the earth has a number of powerful forces affecting climate that gives fairly wide fluctuations over millions of years, but also countervailing forces (negative feedback) that gives sufficient stability to sustain life.


However, those who are about to read the book should be aware of the lack of an editor. The following can criticisms can be made

–         Pilmer uses every possible criticism available. So the temperature rise of the last century could be explained by a number of factors.

–         The case for the influence of climate on human history may be over stated, but still raises questions on the current orthodoxy.

–         There are a number of errors or exaggerations, that will be used as an excuse to dismiss the book. See George Monbiot in the Guardian at Some of the “errors” may be a matter of opinion, but they only counter points 4 and 5.

–          It is written in a polemical style, that may confirm the belief of the doubters, but will not gain many converts from the AGW true believers. It is repetitive, introduces new topics at random and gives too many, poorly supported, examples.


On the evidence to page 223, there is scope at least for a second edition. More plausibly, for a journal is better able to draw together the diverse bits of information than one person working alone. Pilmer’s book is more than sufficient to undermine the case for delivering the human race into poverty and serfdom to “save the planet” to the unbiased person weighing the arguments. Sadly, policy-makers are being railroaded in one direction by political techniques more akin to the USSR than modern democracies.