One of the most consistent targets of criticism of this web site over its lifetime has been its continual condemnation of the very idea of a single currency for Europe. To respond would have then been to be involved in a morass of unproductive verbiage, but the times they are a changing.
The story of the euro has been one of remarkable twists and turns. Back in June 2003, for example, it was Germany that was on the rack when the UK side-stepped the decision to join the single currency, masking it with a quite astonishing display of obfuscation. The Number Watch comment on this drew typical fire from a supporter of the political establishment, involving a wide-ranging attack that included an accusation of innumeracy. The German situation, however, was a side show, a product of reunification, which eventually subsided. The real fault line of the single currency was more basic. It is always a dangerous enterprise to attempt a simplified argument in economics, but here is a try.
Imagine two countries that are completely independent. Conjecture now upon a time when their two economies happen to be of exactly equal strength. What is likely to happen thereafter? Small changes will occur, either to the good or to the bad. Such changes might be due to things like harvests, pro-active governments ignoring the law of unintended consequences, labour unrest, irresponsible profiteering by financial businesses and thousands of other factors. By dint of these random happenings one country will inevitably draw ahead of the other. Enter the currency markets. The currency of the leading country will increase in value while the other will experience a decline. This change creates economic forces that work against it (Le Chatelier-Braun Principle). The weaker country will find its exports are more competitive, while imports are dearer and therefore fewer, its tourist industry benefits and many other activities are subject to similar forces. It is not all good news, of course, and inflation becomes an increasing threat, but if governments behave sensibly the overall effect is one of negative feedback, which is a recipe for stability. This does not, naturally, rule out other effects not covered here that will result in longer term drift.
Consider now the same two countries with one essential difference, that between them they create a single currency. Now, when those small changes occur, the stronger economy experiences an undervalued currency and the weaker one an overvalued currency, yet they are the same currency. Those stabilising negative feedback effects will be removed at a stroke and replaced by destabilising positive ones. In particular, there is a perverse incentive towards public and private borrowing in the weaker economy, which is granted an undue financial status by association. There is a borrowed illusion of prosperity that can only be temporary.
Consider further the case of a number of independent countries entering a single currency. By the same process their economies will fan out, continuously and increasingly diverging from each other. These arguments involve the distinction between unstable equilibrium and stable equilibrium (conventionally illustrated by a cone balancing on either its point or its base).
To mix a couple of metaphors, there will always be a whipping boy at the bottom of the pecking order, one who pays for the sins of his betters. The UK experienced that in its disastrous involvement with the ERM. Black Wednesday, triggered by anti-inflationary moves in Germany, virtually bankrupted the British economy and greatly enriched the likes of George Soros. The consequence was that the Conservatives lost their reputation for economic competence and subsequently Gordon Brown was granted more than a decade to inflict further serious economic damage. Give him his due, though, he learned one lesson and kept the UK out of the euro.
Remove the whipping boy and another will take his place. As with all modern disasters the cause is climate change: in this case the change as you travel from the benign south to the inhospitable north. Those idle southerners suffer from the delusion that there is more to life than keeping ones nose permanently to the grindstone. Remove Greece and there is another whipping boy ready to take its place. The canker will thus slowly spread northwards. An exception to this geographical rule is the Irish, but then they always are.
There are only two solutions to the euro problem: either abandon it all together or impose a mass surrender of sovereignty to the Brussels Supreme Soviet. Those who love Europe for its diversity and traditions will dread the latter menace and will cling to their cry of Vive la différence.
The fellow travelling members of the establishment media are forever greeting new costly installations of renewable energy with phrases such as “will provide enough power for 10,000 homes”. The truth is, of course, that most of the time they will provide power for no homes at all. Sceptics lurking in the interstices of the internet point out that these sources will require “back-up” from conventional sources. How can we describe as “back-up” something that will need to be working for two thirds of the time? A more accurate term would be “front-up”.
You could not make it up. Do you laugh or cry! The Daily Telegraph has published a thick supplement on places still available in “universities” after the announcement of UK A-level examination results. The first entry in the alphabetic list is Abuse, in which two institutions are offering degrees. Among other categories of “degrees” on offer are:
Chinese Medicine (traditional)
Furniture production management
Health and safety
Supply chain management
To name but a few.
Number Watch wishes to apologise for earlier use of the derogatory term “Mickey Mouse universities”. This was an unforgivable insult to that entertaining rodent and is therefore unconditionally withdrawn.
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So rail fares in England are to go up by yet another 6.2%. This is a result of an “inflation plus” agreement: yet another fine example of political innumeracy at work. Such cases are implementations of positive feedback mechanisms that promote inflationary instability. They contribute to a larger estimate of next year’s inflation rate, which will contribute to the next year and on and on.
Politicians and the media have taken their eyes off the inflation ball, because the apparent current rate is historically low. They always do that: then they get into a panic a few years later when the inexorable rise starts.
The definition of inflation has conveniently changed in recent years, having switched from cause to effect. That is where the political double-talk thrives. Printing money is alright now as long as you call it something else, preferably a bit of jargon (e.g. Quantitative Easing, or even better QE) that no one really understands. Nevertheless the result must inevitably be rising prices, even if they are at present masked and delayed by other economic factors. Periods of catastrophically high inflation are almost always caused by political actions taken in earlier times of low inflation.
Richard Branson has described the award of the west coast line franchise to FirstGroup as “insane”. You might not have immediate sympathy of a man whose fortune is only exceeded by the size of his ego, but he is quite correct.
First an admission of prejudice. On retirement to the Wild West of England your bending author promised to keep in touch with a close group of colleagues by attending some of their regular gatherings in a Southampton pub. It was not wise to drive to such an event, so the plan was to go by train. Unfortunately, although it was only in the next county, this involved two changes. Even more unfortunately, as it transpired, the middle section was on First Great Western (known locally as Worst Late Western). As the early signs of joint problems that would later lead to crippledom were becoming manifest, an extravagant investment in a first class ticket was indicated. The first leg of the journey was pleasantly comfortable, but the disaster started on the platform at Salisbury. The FGW train would be ten minutes late, then twenty minutes late and, when it arrived, 30 minutes late. It comprised only two carriages with no first class and was packed with standing passengers. I made the foolish decision to press on with the journey. Some of the passengers were in considerable distress, some having stood all the way from Wales. One of them bellowed “Railway? They could not operate a wheel barrow”. There was a rumble of hear hears. Of course, I missed the next planned connection and my friends were just getting ready to leave as I arrived. It was only slightly less of a disaster on the return journey and, having missed the connection again, I found myself on a commuter train with standing room only. I was near to tears with pain by the time I was met at the local station and that, a decade ago, was the last time I travelled by train.
The FirstGroup submission for the franchise is a clear example of that modern disease “spread sheet fantasy” that is the reliable route to bankruptcy. Virgin Trains have previously lost out on two such bids and in each case the successful bidder gave up the ghost part way through the term of the franchise. As Branson rightly says "Insanity is doing the same thing over and over again and expecting different results."
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This year a kinky jet stream has imposed catastrophic weather conditions on the northern hemisphere, which has aroused great excitement among the warmist tendency. Ignoring the jet stream is a major reason why our weather forecasters are so useless. Much is made in the American establishment media of the severe drought in corn growing areas, while they blithely ignore the linked effects of a dull summer in parts of Europe.
In the UK 2007 was a year without a summer, as this has been. We have had brief floods before, but there has been nothing like the present long dull, damp period in living memory. As a small example, here in a corner of Wiltshire the buddleia have produced a magnificent show of blossom, but they have not been visited by one single coloured butterfly. Birds have been breeding late and the shortage of insect larvae has made them desperate for food, so we have kept the bird feeders topped up throughout the year. Harvests have been severely affected by rain in the north of Europe and by drought in the south.
The drought in the USA has exposed the lunacy of the ethanol mandate in northern America. Even if there were a sound reason for reducing carbon emissions, turning food into motor fuel does not achieve that. Just as much of the world is teetering on the edge of economic catastrophe a totally artificial food shortage is boosting prices. It is just another green dream adding force to various attacks on domestic energy supply.
In Britain Dave’s stunts are becoming increasingly bizarre. Faced with an overwhelming economic crisis that should be his preoccupation, he seems to be intent on creating irrelevant political diversions, such as homosexual marriage. The elderly and the low earners are increasingly suffering from energy poverty, with potentially fatal results, in great part due to stealth taxes imposed to provide grandiose religious symbols in the form of worse-than-useless wind turbines. Now he is promoting a scheme to destroy the ecology of the Severn estuary in the name of the environment.
Talk about fiddling while Rome burns.
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These two are a pair of men lurking at the murky green heart of the modern British Parliamentary Conservative party. They are John Gummer, aka LORD Deben, and Tim Yeo MP. Oddly enough they both appeared in Number Watch during its second year (2001) but it is thanks to that brave terrier for truth, Christopher Booker, that we are brought up to date with their current activities. My! Haven’t they done well out of the greenie rackets?
It was in April 2001 that John Gummer turned up during the tracking of the source of an attack on this web site (see Like a circle in a spiral, like…….and our vocabulary). This was four years before the party submitted to a Greenie coup led by Stuntman Dave. The party had lost its reputation for economic competence after the ERM fiasco and thus gifted more than a decade of uninterrupted power to New Labour. It eventually panicked and handed the leadership to a scion of the former political elite, Eton and Oxford, after the better qualified candidate unfortunately froze at the hustings.
In the November of 2001 Tim Yeo appeared in an account of the aftermath of the foot and mouth holocaust when he complained that the slaughter had not been efficient enough. He was subsequently awarded the cup for Socialist of the Year in the 2008 Numby awards. He turned up here again only last month when that other noted seeker after truth, James Delingpole, turned the searchlight on his business dealings.
These two are the present and proposed chairmen of the influential and supposedly “independent” Committee on Climate Change, set up to advise government on energy policy under the Climate Change Act.
One tries hard to avoid extreme words, such as “corrupt” and “crooked”, when commenting on the current political scene, but it is becoming increasingly difficult.
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PS: A call to alms
This is the expensive time of year for Number Watch as all the bills for services come in. Because of the continual threat of attack it is necessary to invest in a robust hosting service and the best of security software: all this on top of having had to replace hardware after a disastrous crash. So if any reader has felt the temptation to drop a few pennies into the begging bowl, now would be a helpful time.
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