The Berlin Wall, the DDR and New Labour

I remember twenty years ago watching as the people of the Socialist paradise surged across Checkpoint Charlie into the bright lights of the West, as the 28 year old Berlin Wall was breached. It was but part of a process that began with the Hungarians taking down the fence, and continued with the Velvet Revolution in Wencelas Square.
The fall of the Berlin Wall may not not have been the triumph of capitalism, but it was the collapse of communism. It represented the end of the era, started in 1917, that saw the deaths of  100 million people at the hands of their own governments in the name of a false utopia. The physical wall, that seemed so impenetrable, was felled with pickaxes and chains. The political system, buttressed by a vast system of informers and secret  police, seem to crumble away even more easily. But the we share some elements of  that repressive  regime share today in this country. In the DDR

1. Everyone had to carry ID cards and constantly present them when asked.
2. A “democratic” country where parliament held no power.
3. Where the official properganda differed from reality.
4. Where every aspect of life was tightly regulated.
5. Arbitary arrest and detention.
6. Endless form filling and checking on every aspect of people’s lives. And where that form filling served as a huge hinderance, but no useful purpose outside of the bureaucratic machine.

It is worthwhile to remember that a moderate socialist party contains elements of the authoritarian left of the Soviet bloc. Their instincts are that only government solutions are the valid, and that private initiative cannot be trusted. That the individual owes everything to the state, and errant views are by definition not just wrong but dangerous.

Whilst we remember died trying to escape the suffocation and those who were persecuted for the slightest protest, it is also worth a history lesson in how the mass of people lead dreary, impoverished lives, made worse by officialdom.

 

Thanks to John Redwood, who stimulated my thoughts.

 

 

Labour Down to 120 seats in 2010?

Could Labour really be reduced to 120 seat’s at the next general election? Not impossible, but would hand the Conservatives a poison chalice

Jackie Ashley claims in the Guardian.

“Some Labour people may think I’m sounding too gloomy, but those who have been privy to recent private polling are a lot more than gloomy. This suggests that Labour could return to the Commons with just 120 MPs or thereabouts, taking the party back to 1930s territory. As ministers look for jobs to keep themselves going after politics, a Miliband move to Europe looks sensible.”

Most polling data based on even swing would give Labour over 200 seats, with the Conservatives getting a majority of 80 to 100. But  this result may be at the extreme end, but should not be unexpected. Compared with the Conservatives in 1997
1. Labour are polling lower in the polls.

2. There is greater de-seated resentment. Labour are not just out of touch, they have

3. Gordon Brown seems less capable than John Major at the job. Furthermore, he shows it. He is nervous, repetitive and cliché-ridden.

In 1997, many voted to punish the Tories. Next year it will be voting to punish Labour. It is not something a Conservative should revel in, as Labour has bred a deep distrust in politics in general (through their spinning and ignoring parliament) along with decimating the nation’s finances. So the Conservatives will have to rebuild trust whilst pushing through deeply unpopular policies.

A word of caution. Although ConservativeHome and Politicalbetting both recognize Jackie Ashley as being close to Labour and a reliable source, the comment is made in a long article on how the Europe question could damage the Conservatives. So maybe we could have a Lib-Dem government?

Should Lord Stern remember some economics?

After Lord Stern’s comments about becoming a vegatarian to save the plant, I suggested he should be consistent and become a vegan. A post by Martin Livermore on the Adam Smith Insitute blog got me thinking that maybe Lord Stern would be advised to remember some lessons from economics. After all, as an economist, Lord Stern was employed to do a cost benefit analysis of tackling global warming. The report was only able to reach its conclusion that we should do something now by taking an extreme view of future temperature change (thus overstating the benefits of any remedy) and seriously understating the costs. Mostly this was by failing to apply an appropriate rate of discount to future costs and benefits.

Since then Lord Stern has become increasingly alarmist. If instead, he applied some of the tools of his profession he would conclude the following.

 

1. Most of the largest greenhouse gas producers are things that have an inelastic demand – such as petrol and fuel to heat one’s home. Therefore the costs will tend to exceed the benefits.

 

2. There are diminishing returns to emissions reductions. Small decreases can be achieved easily. At home most can save a bit by better insulation in the loft, or by turning town the thermostat by 1 degree. Car fuel consumption can be reduced by driving more economically. Bigger savings are less easy, without fundamental changes in lifestyle, which for the majority would mean a significant drop in living standards. For instance,

– switching from frozen and chilled foods to dried and tinned foods.

– switching foreign holidays to camping in the back garden.

– From travelling by car to work to spending three times as long going by public transport, or catching pneumonia cycling.

 

3. Large government projects tend to overrun on costs, and under-perform on benefits. The bigger and more idealistic the project, the larger the (proportionate) discrepancy between plan and outcome. International projects tend to overrun more than national one, as consensus is only achieved by compromise fudging. For the greatest trans-government project of all time, this risk alone should lead to the complete abandonment.

 

4. Complex models tend to fail most in their forecasting when you need them most. Consensus economic forecasts made in 2006 for 2009 would have predicted growth, not biggest slump since the 1930s. Yet compared to economic, climatology is more complex and still in its infancy as a subject. Further there is no competitive market in forecasting to encourage improvement and revision in the light of new data. In economics reputable  forecasting is a valuable commodity. In Climate Science, one is paid to agree with the consensus.

Should Lord Stern now go Vegan?

According to the Times, Lord Stern has gone Vegetarian in an attempt to save the planet. The simple reason is that methane (which cattle and pigs produce in vast quantities) is 23 times more potent as a greenhouse gas than CO2. We therefore need to cut back drastically on the quantity of cattle. But hold on a minute. We also get milkfrom cows as well. Should we be switching to Soya milk and synthetic cheese? Lord Stern

“predicted that people’s attitudes would evolve until meat eating became unacceptable. “I think it’s important that people think about what they are doing and that includes what they are eating,” he said. “I am 61 now and attitudes towards drinking and driving have changed radically since I was a student. People change their notion of what is responsible. They will increasingly ask about the carbon content of their food.”

So when the eco-fanatics start attacking the meat counter of Tescos and sabotaging the school milk deliveries, we will know who to charge with incitement to commit acts of criminal damage and terrorism. Make a change from them dumping manure and sabotaging tyres ot 4x4s.

Is recycling rotting food hygenic?

My local council now says that I can put waste food in the green recycle bin. Oh lovely! Imagine the green bin after having the remains of a chicken carcass and all the juices after putrifying in the hot summer. Especially with some solidified milk on top. Remember the swill bin at school. Now imagine if were only emptied once a fortnight and you get the idea.

My own view is to continue with what I currently do. Double-bag the solid food and swill the liquid or jellified material down the sink with a good dose of detergent.

I will change if some will volunteer to clean out the green bin occasionally. It needs doing as the grass cuttings in the bottom are well composted. But the flies and stench from the rotting fruit put me off at present.

MCC Waste Food

Nationwide and Halifax house price recovery is fragile

The recovery in house prices reported in the Nationwide and Halifax indices underlies a significant issue – that many existing borrowers would see a much higher rate of interest if they moved mortgages. As an example, my own repayment mortgage is currently 1.9% annual interest rat, or 1.4% above base rate. If I moved house Nationwide’s best deal on a tracker is 2.44% above base rate for 2 years and the reverts to 3.9%. There is also a nearly GBP 900 fee. Halifax are similar- 2.69% above base rate for 2 years, then reverts to 3.5%. A GBP 1200 fee here.

These are the cheapest deals, for a loan less than 60% of the house price and are competitive in a thin market. Halifax reports August 2009 approvals were 51% lower than in August 2007. The Nationwide’s measure of private housing sector turnover rate is now 4% , from a peak of 7% and a low of 3%.

As the driving force for the Housing Market is people upgrading to a better house, there may be a considerable number of people delaying moving house for this very reason. It is better to save for a new house by paying down existing borrowings than move to the more expensive house.

Paradoxically, a rise in base rates may prompt a narrowing of this differential and therefore perk up the housing market. The reason being that the marginal cost of moving will have diminished. However

–  there are other reasons for the low levels of housing activity – uncertainty over jobs and the need to pay off debt.

– a rise in interest rates may tip many existing hard-pressed borrowers towards selling. In particular buy-to-let landlords who have seen rents diminish this year.

Post Briffa Yamal paper collapse, is the 0.5% chance of <2oC C21st a good bet?

One of my favourite blogs is Political Betting, not because I am a punter, but because (principally) Mike Smithson aims to give an assessment of how political opinion is moving ad the events that move it. One of the areas to bet on is spread betting, where (in the UK) the blog comments on bets on the number of seats that will be gained by the political parties in the forthcoming general election.

At Wattsupwiththat.com, it reports on some MIT academics producing a fortune wheel.

It is interesting that these chaps from MIT only see a 1 in 200 chance of temperatures not rising above 2 degrees. It is a shame that the forecast is for so long in the future as (where gambling laws allow) it would seem a pretty good wager.  It may be possible to still create a betting market in this with something known as spread betting – a sort of futures market in the gambling industry. For political elections it develops a valid consensus of people “putting their money where their mouth is.” It turns out to be a more accurate assessment of opinion than opinion polls. If the people from MIT represent to popular consensus, then it may be a chance for the skeptics to make some money. As the forecasts of catastrophe fail to materialize, the skeptics will be able to sell their positions at a healthy profit, at the expense of the consensus,who will lose their shirts. My forecast is that the consensus will suddenly become all moralistic about such an idea. Why? Because they would believe that the betting would be far less alarmist than the supposed consensus. This is particularly relevent since MIT have not taken account of the undermining of Briffa’s paper on tree-rings as proxies for temperatures in the Yamal Penninsula.

For those not following the recent climate change debate, Steve McIntyre at Climate Audit has taken apart another hockey stick (See Here, here, here & Here for Climate Audit, or here & here for a Layman’s summary from Bishop Hill)

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 dot.com 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.

MARKETS WILL ADJUST. BEFORE OVERRIDING TO COUNTER FLUCTUATIONS,  YOU SHOULD FIRST BECOME OMINISCIENT.

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 playpolitical.com

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

 

Comments by John Redwood, Ian Dale