FSA - Light Touch Regulation?

The FSA rule book, if printed out, stands 8 feet / 2.440 metres high.

If nothing else that nails the lie of light touch regulation.

Update:

Regarding my response to MW comment you can find how the FSA/FOS/FCSC admitted it can 'create law' here

“We do not have to pretend to ‘find’ what the law is. We unashamedly make new ‘law’”, boasted Walter Merricks in a June 2001 speech to the Financial Regulation Industry Group

How can a Quango be allowed to make new law? How can it be allowed to be applied without Parliament approving it? Is it at all compatible with freedom for the Government to empower Quangos like this?

FSA - Again

The FSA is admitting that it made mistakes in regulation that may have made a difference to the severity of the banking failures. Yeah, right.

The only way that the FSA 'regulation' could have had a chance of preventing the banking crisis was to regulate upwards, to the Bank of England the Treasury and The Chancellor of the Exchequer.

Once a government with a monopoly of money starts on the unsound money route the country is doomed. The FSA would have had to stop Gordon Brown from printing money, it would have had to make the Bank of England ignore the spurious CPI price index measure and make it take more heed of broad money supply and it would have had to stop the Treasury sanctioning profligate government spending and off balance sheet borrowing.

Financial services 'regulation' does not work from the top down. It has to work from the bottom up. We, the people, have to make sure that the governments we elect know the principles of sound money and macro economic management and how to spend our money wisely and miserly.

We failed with New Labour.

A = B x C

A = B x C

Where

A = economic meltdown

B = Bankers

C = Chancellor of the Exchequer.

It's simple sum and it works like this:-

I listened to an edited version of the parliamentary committee interviewing the Bankers today.

I am sorry but I have seriously lost my sense of proportion when it comes to Bankers. They've always been too big for their boots. They adopt the same assumptive superioty of languange and attitude beloved by that other alledgedly useful commercial class, estate agents.

Let's get this straight, banking is a very simple business. It has two bits of work to do. One, it operates as your fiduciary by offering an account management service. A clerking job. Two, it takes the money you deposit and acting as your intermediary it lends it out to someone. The difference in price between what they pay you and what they charge someone else is their commission. Right, having set that out I will concede that this simple model can get more complicated in action, but the essential model is as simple as I have set out.

Now then, in the past about twenty years, there has been a consolidation of banking businesses such that there are now about 6 actual banks. They all offer the same service at the same price. There is zero differentiation. They are a cartel. A cartel supplier of a monopoly product.

What is the monopoly product. Money. In the UK that's Sterling.

So who makes this product? Yep, the UK government, currently under the control of the well know one eyed Scots idiot.

So, suppose you are supplying this monopoly product and the manufacturer massively increases the amount he supplies and slashes the price? What are you going to do? How are you going to make money storing this excess product? You can't. You have to sell it on. And sell it on in vast quantities.

In short then, however nice it is to hear the multi eyed not necessarily Scots (althgough one of the banks was) idiots apologising, when are we going to get the real grovelling mea culpa from the other key player in this disaster?

You tell me.

Inflation. The Evidence?

This is a graph based on data from the World Gold Council. Now, I am not saying that there are not other factors at work here (do we know whether we have discovered all the gold fields yet?). But it seems to me that there is a correlation between the exit from the Gold Standard and inflation. I am assuming that the Misian definition that inflation is the growth in money supply plus its reduction in quality, applies here. In other words the temptation is for Governments running monopoly fiat money to inflate away their self induced problems at our expense.

Just a thought. Happy to be argued with.

Why Bailouts - Neither Here nor Over There - Won't Work

The following snippet was copied and pasted from Dimensional Fund Advisors website. (My business is a committed and, for our size, a big user of DFA passive funds).

Jan 28, 2009Essays
Bailouts and Stimulus Plans - Addendum 1/28/09
by EUGENE F. FAMA
In his NY Times blog Paul Krugman attacks my piece on the stimulus plan.
Again, here is my argument in three sentences.
1. Bailouts and stimulus plans must be financed.
2. If the financing takes the form of additional government debt, the added debt displaces other uses of the same funds.
3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses.
Are any of these statements incorrect?

[Eugene F Fama is a financial economist and renowned for his work on efficient investment]

They Still Don't Get it

Guido Fawkes pointed me to a book review here.

Liberal Fascism: The Secret History of the Left From Mussolini to the Politics of Meaning Jonah Goldberg Penguin £9.99, pp496 Nick Cohen finds much to admire in a blistering attack on liberalism.

It's a book I shall buy.

The reviewer for the Guardian a Mr. Nick Cohen cannot bear to let the right have the win and his last paragraph is:

Liberal Fascism is a bracing and stylish examination of political history. That it is being published at a time when Goldberg's free market has failed and big government and charismatic presidents are on their way back in no way invalidates his work. Hard times test intellectuals and, for all its occasional false notes, Goldberg's case survives.

Classic. Look, sunshine, we've had big government for yonks. And we've had charismatic (and useless) leaders in recent times. It's them that have failed. The present difficulties are free markets succeeding and passing judgment on just the sort of Statist fascist tendencies the book you've reviewed has warned us of.

Plonker

Thought for the Day

I copied the following from an email from a colleague of mine. It deserves to be shared:

(Galt Capital a Virgin Isles based Investment Advisor).

"Happiness is not to be achieved at the command of emotional whims. Happiness is not the satisfaction of whatever irrational wishes you might blindly attempt to indulge. Happiness is a state of non-contradictory joy—a joy without penalty or guilt, a joy that does not clash with any of your values and does not work for your own destruction, not the joy of escaping from your mind, but of using your mind's fullest power, not the joy of faking reality, but of achieving values that are real, not the joy of a drunkard, but of a producer. Happiness is possible only to a rational man, the man who desires nothing but rational goals, seeks nothing but rational values and finds his joy in nothing but rational actions.

Just as I support my life, neither by robbery nor alms, but by my own effort, so I do not seek to derive my happiness from the injury of the favor of others, but earn it by my own achievement. Just as I do not consider the pleasure of others as the goal of my life, so I do not consider my pleasure as the goal of the lives of others. Just as there are no contradictions in my values and no conflicts among my desires—so there are no victims and no conflicts of interest among rational men, men who do not desire the unearned and do not view one another with a cannibal's lust, men who neither make sacrifices nor accept them.

The symbol of all relationships among such men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot are traders, both in manner and spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder, or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtue, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the trader and held him in contempt, while honoring the beggars and the looters, have known the secret motive of the sneers: a trader is the entity they dread—a man of justice.

John Galt

Atlas Shrugged