Hugh Roberts asks Who Said Gadaffi Had To Go?

It is tendentious and dishonest to say simply that Gadaffi was "killing his own people"; he was killing those of his own people who were rebelling. He was doing in his respect what every government in history has done when faced with a rebellion. We are all free to prefer the rebels to the government in any given case. But the relative merits of the two sides aren't the issue in such situations: the issue is the right of a state to defend itself against violent subversion. That right, once taken for granted as the corollary of sovereignty, is now compromised. Theoretically, it is qualified by certain rules. But as we have seen, the invocation of rules (e.g. no genocide) can go together with cynical exaggeration and distortion of the facts by other states. There are in fact no reliable rules. A state may repress a revolt if the permanent veto-holding powers on the Security Council allow it to (e.g. Bahrain, but also Sri Lanka) and not otherwise. And if a state thinks it can take this informal authorisation to defend itself as read because it is on good terms with London, Paris and Washington and is honouring all its agreements with them, as Libya was, it had better beware. Terms can change without warning from one day to the next. The matter is now arbitrary, and arbitrariness is the opposite of law.

Christopher Hitchens on death

"Death has this much to be said for it:
You don't have to get out of bed for it.
Wherever you happen to be
They bring it to you - free."
- Kingsley Amis

Dickens on TV every Christmas

The English middle classes like a conservative radical: Charles Dickens, Stephen Fry, Ian Hislop

David Marquand on European politics

David Marquand, a former British MP and a commentator on Europe, writes: “At the heart of the European project lay an unacknowledged but pervasive ambivalence about politics. In transcending the nation state, the founding fathers were also seeking to transcend—or rather to escape from—the messy, vulgar, clamorous irrationality of political life.”

Hans Kundnani on the German question

Hans Kundnani, editorial director of the European Council on Foreign Relations, recently argued in the Washington Quarterly that “Germany’s economy is too big for any of its neighbours, such as France, to challenge…but not big enough for Germany to exercise hegemony.” This, he concluded, is an economic statement of the “German question” that tormented Europe for 75 years after German unification in 1871.

Peter Apsden on TV

In the mid-1980s, the entire ninth series of Dallas was revealed to be a bad dream, a twist that might have hinted at Borgesian surrealism but gave every impression of having been scribbled on the back of a spent cocaine packet in a Los Angeles traffic jam.

Gavekal on China

The dynamism of China's industrialization process is such that it is easy to both exaggerate the upsides ("a billion customers") as well as the downsides ("ghost cities abound!"). As we see it, it seems the downsides are currently being exaggerated. This is not overly surprising, because China's policymakers have indeed been fighting the dragon of excessive liquidity creation since 2009, and this has been neither easy nor pretty. But while there are undoubtedly very real financial risks, with some companies and individuals facing very real stress, investors should put the situation in context. Indeed, we refer readers to Joyce's ad hoc published yesterday, The Shadow Knows-Exploring China's Hidden Financial System, which highlights that:

* The unofficial funding channels which have evaded official credit restrictions in the past year, and thus made it harder for Beijing to control inflation, have always existed. Moreover, these unofficial channels are actually a long-term positive: in the state controlled financing sector, credit is not only irrationally (cheaply) priced, but it is often allotted to favored parties (such as state-owned companies). In "shadow financing" activities, we are now witnessing market pricing of both deposits and loans-which is the exact structural direction in which China's financial system needs to move. In the long run, this is a good thing.

* No doubt, however, shadow financing activities have gotten out of hand recently, and have complicated Beijing's effort to fight inflation. We estimate that shadow financing activities made up about 16% of total outstanding credit in the past decade; however credit extended through channels other than the formal bank loans and the bond market reached about RMB17 trillion by mid-2011, or about 25% of the total. Moreover, shadow financing accounted for more than 40% of new credit creation in 2010 and 1H11.

....Our view is that China is likely to continue to tighten shadow financing, but will, in small, quiet ways, such as through open market operations, start to loosen official liquidity conditions.

John Stuart Mill

"Panics do not destroy capital. They merely reveal the extent to which it has previously been destroyed by its betrayal into hopelessly unproductive works." 

Charles Gave on market intervention

Such distortions reverberate throughout the system, affecting every asset class from commodities to real estate. They also create a domino effect of spreading interventions, wack-a-mole style. So to summarize, after ten years of "smart" interventions by astute policymakers we are now left without any proper market pricing mechanism for:

1) US interest rates and exchange rates - both manipulated by the Fed

2) Oil prices - which are manipulated on a second order by the undervalued Dollar

3) The Euro exchange rate - manipulated by the ECB and China

4) Sovereign yields in Europe - manipulated by the ECB and the PBOC

5) The Swiss France and the Yen - now both manipulated by the local central banks.

It is no wonder international liquidity is vulnerable to a squeeze and markets are nervous. Why anybody is surprised that we have been in bear markets for the better part of the last ten years is beyond me. Never in my 40 year career have I seen such a combination of incompetence and intellectual arrogance in the ruling class.

Kwasi Kwarteng on the British Empire from The Economist

In Sudan, a notably snobbish spot, one-third of all colonial political officers were the sons of clergymen and half of those recruited between 1902 and 1914 had a “Blue” (a sporting distinction) from Oxford or Cambridge, leading to the quip that Sudan was a land of “Blacks ruled by Blues”. In the 1930s, only officials able to play polo could hope for advancement in the Sudanese province of Darfur: in the same period, Darfur had just one primary school. In 1916, Mr Kwarteng notes, David Lloyd George, the humble son of a Welsh Baptist minister, could become Britain’s prime minister, but would have stood no chance of being governor of colonial Nigeria.

Merrill Lynch on Eurobond spreads from the FT

The argument goes that with a joint and severally guaranteed Eurobond, the low refinancing cost of Germany would be exported to the periphery, at marginal cost to Germany. The cost would be a function of Germany’s refinancing cost today, relative to the weighted average spread of Eurozone sovereigns either today, or at some arbitrary point in the past.

We find this argument fundamentally flawed: if a Eurobond just mutualises debt issuance, the default probability of a Eurobond is the default probability of the largest country that cannot be bailed out by the core. This is because Germany and other AAA countries alone cannot credibly guarantee the debt of the entire Eurozone. This is the fundamental difference between a Federation, such as the US or Germany, and a Union of sovereign member states, such as EMU.

David Runciman on Blue Labour

As far as I can see there are two basic problems for Maurice Glasman, one related to what liberals never do and one to what they always do. The sin of omission is the inability of liberal politics to resist the depredations of international finance capitalism. This is the real passion that motivates Blue Labour: the sense that the country has been raped by bankers, and all on the watch of a Labour government....All they do is talk about individuals with their rights and responsibilities, their choices and freedoms, without noticing that individuals are like confetti in the face of the whirlwind power of money.....The other problem with liberals...is that liberals have a fatal weakness for abstraction....they prefer nice ideals to real people.

Conrad Black on Rupert Murdoch in the FT

Although his personality is generally quite agreeable, Mr Murdoch has no loyalty to anyone or anything except his company. He has difficulty keeping friendships; rarely keeps his word for long; is an exploiter of the discomfort of others; and has betrayed every political leader who ever helped him in any country, except Ronald Reagan and perhaps Tony Blair. All his instincts are downmarket; he is not only a tabloid sensationalist; he is a malicious myth-maker, an assassin of the dignity of others and of respected institutions, all in the guise of anti-elitism. He masquerades as a pillar of contemporary, enlightened populism in Britain and sensible conservatism in the US, though he has been assiduously kissing the undercarriage of the rulers of Beijing for years. His notions of public entertainment and civic values are enshrined in the cartoon television series The Simpsons: all public officials are crooks and the public is an ignorant lumpenproletariat. There is nothing illegal in this, and it has amusing aspects, but it is unbecoming someone who has been the subject of such widespread deference and official preferments.

Sir Martin Jacomb on Greece in the FT

The euro gave the peripheral countries a standard of living above their earning power and, at the same time, took away their ability to correct this by devaluation. It is the same process which led to the permanent impoverishment of southern Italy, when the lira became the national currency after Italy was united under the Risorgimento 150 years ago. At the turn of the 19th century Naples was the largest city in Italy and the region was relatively sophisticated. But its economy declined relative to the north. Although it had started to build railways in the 1830s, before any other part of Italy, the effort was soon discontinued. Moreover, railways were unable to reach the length of the country because Pope Gregory XVI forbade their construction in the Papal States. He called them “chemins d’enfer”. The economies of north and south thus became progressively divergent. Southern Italy’s economic decline continued but, with the introduction of the lira, it lost its ability to correct its uncompetitive position. Able and enterprising people moved to the north or emigrated, and the situation became permanent, as it remains today. This tragedy endures.

On the Greek fiscal crisis

Letter from David Riley of Fitch to the FT: "it is surprising and unfortunate that so much effort appears to have been invested in circumventing a particular rating outcome. By far the most important and beneficial outcome for Greece and its creditors is securing a credible solution to the current crisis. In light of the market focus on a rating outcome...Fitch is guided by the spirit as well as the letter of the criteria. If it looks like a default we will rate it as a default."

Kermode on Shakespeare

...One of Kermode's most important points. The later Shakespearean technique has foregone the traditional routine academic rhetoric for a new and supple style that follows the movement of a mind....For Kermode, the new capacity to create a style that follows the process of thought, with all its hesitations and convolutions, begins with Richard II.

Spinoza on interpretation

It is one thing to understand the meaning of Scripture, and quite another to understand the actual truth.

NYRB on Buster Keaton

The logic of his first pictures, the two-reel pictures, resembles the logic of dreams. It was an alternate reality that freed him from narrative obligations - one thing simply followed another - and allowed him to pack a staggering quantity of life's particulars into each twenty-minute film......Keaton's dreams and dream-like camera effects seem to compound the stillness and inwardness of his deadpan character. They are not a break from reality but a truer form of it.

The genius of Buster Keaton

"What you have to do is create a character. Then the character just does his best, and there's your comedy. No begging."

GaveKal on the weak US$

The markets have clearly started to signal that further weakness in the US$ is no longer a positive development for the macro-environment (see A Roadmap for the Coming Changes in Fed Policy). After all, with the US trade deficit being almost entirely made up by China and oil, a weaker US$ from here probably means a deteriorating trade balance for the US' non-China/non energy trade partners (a theme we will explore further in an upcoming ad-hoc). Simultaneously, a weaker US$ accentuates inflationary pressures around the world, eating into margins and forcing other central banks (e.g., Poland's surprise rate hike yesterday) to adopt tighter monetary policies...

However, the real reason most of the clients we have talked to lately seem to be so uncomfortable is the growing perception that, with QE2, the "weights and measures" of our financial system have been tinkered with and who knows what consequences this will have? Indeed, investing is all about "value"-figuring out where the value is and why "values" move over time. To measure this we use money-even if it is very hard to explain why money itself has any "value," since, in our world of fiat money the marginal cost of producing money is zero. So the investment business has two sides. The easy side is trying to understand how the values are going to move versus one another (i.e., equities vs bonds, or Japan vs China...), making in the meantime the assumption that the value of money will not. The difficult side is trying to understand whether the value of money itself is about to change.

Now money has two prices: a domestic price (interest rates), and an international price (the exchange rate). Thus, the only way for a fiat monetary system to work is if the different monies, each corresponding to different economic and political systems, can compete freely against one another. Which is why things are so tricky today: there are three major economic blocks (US, EMU, China...) which now account for more than half of global GDP. But their currencies are completely out of whack and heavily manipulated by governments and central banks. This leaves investors without a proper "weight and measure" system to establish how to invest-and the feeling that this status quo cannot last. No wonder the level of discomfort is high.

Hooman Majd on Ahmadinejad

Ahmadinejad, with his street Persian, his the common shoes and his car salesman coat, is the common man. Majd, who loves this sort of comparison, likens him to Sarah Palin.

Louis MacNeice on Oxford

You can never really again
Believe anything that anyone says, and that is an asset
In a world like ours.

Anita Desai on Gandhi

Gandhi did not follow the traditional Indian formula: his ashram was based not on religion but on universal humanistic thought. How had this come about? Joseph Lelyveld believes that "if there is a single seminal experience in his intellectual development," it was reading Tolstoy's The Kingdom Of God Is Within You. The Hindu revolutionary Sri Aurobindo went so far as to say, "Gandhi is a European - truly a Russian Christian in an Indian body."

David Wallace on boredom

To function effectively in an environment that precludes everything vital and human is the key to modern life. If you are immune to boredom, there is literally nothing you cannot accomplish.

David Wallace on AA

They somehow omit to mention that the way it gets better and you get better is through pain. Not around pain or in spite of it. They leave this out, talking instead about Gratitude and Release from Compulsion. There's serious pain in being sober, though, you find out, after time....

They neglect to tell you that after the urge to get high magically vanishes and you've been Substanceless for maybe six or eight months, you'll begin to start to "Get In Touch" with why it was that you used Substances in the first place. You'll start to feel why it was you were dependent on what was, when you get right down to it, an anaesthetic. "Getting In Touch With Your Feelings" is another-quilted-sampler type cliche that ends up masking something ghastly deep and real, it turns out. It starts to turn out that the vapider the AA cliche, the sharper the canines of the real truth it covers.

Bronowski on the good life

The good life is more than just material decency. But it must be based on material decency.

The Economist on public sector reform

Despite all that rhetoric from the tea-partiers, big government is not just the fault of self-interested bureaucrats and leftist politicians. Conservative voters, even if they don’t like taxes, have kept on demanding that the state does more. Just as the left has built hospitals, announced endless programmes to help the poor and indulged the teachers’ unions, the right has built prisons, announced wars on drugs and terror, and indulged generals, farmers and policemen. 

The wisdom of Herb Stein

“IF something cannot go on for ever, it will stop,” Herb Stein once observed caustically. The American economist’s aphorism has proved apt of late—as applicable to Hosni Mubarak’s regime as it was to America’s rising property prices....


From The Economist.

Garton-Ash on US and European reactions to the GWOT

“To return from the US to Europe is to travel from a country that thinks it is on the front line of the struggle against jihadist terrorism, but is not, to a continent which is on the front line but still has not woken up to the fact."

The Economist's obit of Alfred Kahn

....Breezily, too, he winged his way in government. He was an academic, after all; he had nothing to lose, so he would speak his mind. Asked once by a reporter if he could defend the defence budget, he said “No”. Told off for using the word “depression” in public, he replaced it with “banana”, and announced that the country was heading for its worst banana in 45 years. Told off by the head of United Fruit for using “banana”, he made it “kumquat”. As the oil price continued to soar he called the Arab producers “schnooks”, earning yet another rebuke; but he didn’t care. He could always go back to being dean of Cornell’s College of Arts and Sciences, as he did in 1980, even though “dean is to faculty as a hydrant is to a dog.”

Zizek on The Dark Knight as a parallel to Wikileaks

The district attorney, Harvey Dent, an obsessive vigilante who is corrupted and himself commits murders, is killed by Batman. Batman and his friend, police commissioner Gordon realise that the city's morale would suffer if Dent's murders were made public, so plot to preserve his image by holding Batman responsible for the killings. The film's take home message is that lying is necessary to sustain public morale: only a lie can redeem us. No wonder the figure of truth in the film is the Joker, its supreme villain. He makes it clear that his attacks on Gotham City will stop when Batman takes off his mask and reveals his true identity; to prevent this disclosure and to protect Batman, Dent tells the press he is Batman - another lie. In order to entrap the Joker, Gordon fakes his own death - yet another lie.

The Joker wants to disclose the truth beneath the mask convinced that this will destroy the social order. What shall we call him? A terrorist? Civilisation, in other words, must be grounded on a lie.

Zizek on Wikileaks

There has been, from the outset, something about its (Wikileaks) actions that goes beyond liberal conceptions of the free flow of information. We shouldn't look for this excess at the level of content. The only surprising thing about the Wikileaks revelations is that they contain no surprises. Didn't we learn exactly what we expected to learn? The real disturbance was at the level of appearances: we can no longer pretend we don't know what everyone knows we know. This is the paradox of public space: even if everyone knows an unpleasant fact, saying it in public changes everything.

Keynes on Lloyd-George at Versailles

"How can I convey any just impression of this extraordinary figure of our time, this siren, this goat-footed bard, this half-human visitor to our age from the hag-ridden magic and enchanted woods of Celtic antiquity?....that flavour of purposelessness, inner irresponsibility, existence outside or away from our Saxon good and evil, mixed with cunning, remorselessness, love of power."

Beatrice Webb on David Lloyd-George

"He is a blatant intriguer - and every word he says is of the nature of an offer "to do a deal". He neither likes nor dislikes you; you are a mere instrument, one among many - sometimes of value, sometimes not worth picking up."

David Beckwith on why rising USTs aren't a sign that QE2 has failed

If QE2 is successful, then we would expect treasury yields to rise! A successful QE will first raise inflation expectations. This alone will put upward pressure on nominal yields. However, expectations of higher inflation are in effect expectations of higher nominal spending. And higher expected nominal spending in an economy with sticky prices and excess capacity will lead to increases in expected real economic growth. The expected real economic growth should in turn increase the real yields. It is that simple.