The Bewilderness

Is money a growth industry?

Professor Charles Goodhart of the London School of Economics is warning that monetary indicators do not tell us a good story.

Reconstructed data shows that M3 shrank at an annual rate of 7.2pc in the three months to November. Bank loans have fallen from $7.1 trillion (£4.4 trillion) to $6.75 trillion since the end of May.

In the eurozone, M3 has fallen slightly since February. Professor Tim Congdon from International Monetary Research said credit contraction on both sides of the Atlantic has been the steepest since the 1930s, risking a slide into deflation next year.

Banks are tightening credit for two reasons: losses from the crisis, and tougher capital adequacy rules imposed by regulators. Mr Congdon said it is bizarre that the European Central Bank (ECB) seems unwilling to take steps to prevent a monetary implosion in these circumstances.

Borrowers continue to pay down debt, showing better sense than their governments.

Gordon finally enters the heart of Europe

Gordon Brown found the triumphs and constraints of Copenhagen frustrating. Denied an opportunity to spin his saviour routine, he has lamented and, in true tranzi fashion, called for reform as only he knows how:

A new global body dedicated to environmental stewardship is needed to prevent a repeat of the deadlock which undermined the Copenhagen climate change summit, Gordon Brown will say tomorrow.

The UN’s consensual method of negotiation, which requires all 192 countries to reach agreement, needs to be reformed to ensure that the will of the majority prevails, he feels.

Read that again, the EU writ large across the globe! No matter whether you were democratic and liberal or nasty and authoritarian, your vote would count the same and override any form of national sovereignty, in the name of the environment.

The first question that arises on this ill-thought proposal was Brown raising a balloon for himself in a post-electoral role. Secondly, the sanctions required would kill it. But do we need a Prime Minister whose unrealistic response to defeat is to roll out some dream puff and ride roughshod over those who disagree. Surely a high mark for Labour at the heart of Europe!

UPDATE: I should have noted that Brown has nade a radical break with Un governance in his comments. Is this a first?

The debt rack tightens another notch

Ambrose Evans-Pritchard (AEP) is one of the more discussed and read columnists on the Telegraph, profiting from that strange axis of finance and geopolitics that has emerged in recent years. Some thoughts on that emergence could include the decrease in thought or quality amongst public commentators or the withdrawal of foreign policy debate from popular terms. Dependent upon subscription, financial pundits will use a comprehensible discourse.

AEP's latest guide is on the proposed re-emergence of terrorism in southern Europe. This is a self-fulfilling reference as he was quick to propose political unrest following the credit crunch. We are not quite there yet.

I do not know if this can be called a 'Mediterranean triangle' of anarchist violence, as this is a diverse set of violent responses to particular governments. Why is it worse now than the late 90s? Will these countries break down?

The EMU system has condemned Club Med to structural depression, with no way out. The logical – yet politically absurd – response of German Chancellor Angela Merkel is to talk of overriding national democracies in order to save the euro. "The question arises over what authority Europe has to tell national parliaments what to do, in order to avoid damage to Europe itself? National parliaments don't like to be dictated to about such things, but we need to address the problem," she said.

Sovereignty and democracy will triumph eventually, though Merkel must be unwilling to fleece German taxpayers to salvage these countries. The wheel is getting tighter.

No party seals the deal in 2009

The Times today reports that the Tory high command are unsure how to deal with the narrowing of their lead in the polls. The narrative (and how accurate is that?) tells us that Labour is focusing on their core vote, whilst the Tories have not 'sealed the deal'. But is it clear that a lack of confidence in the Tories is turning voters away from them? Do we know that Labour is just appealing to its core voters?

The dip in the Tory lead commenced when they dropped their promise of a referendum on the Lisbon treaty. Whilst the Eurosceptic wing within the party was disciplined and remained quiet, wider commentary portrayed this decision as a betrayal of trust. The advantage that the Tories had over Labour was one of honesty; whether that was true of not is immaterial, that was the perception. Cameron squandered that advantage with his 'realist' withdrawal from the pledge.

The belief that they are all the same is corroded further with the accusations over Lord Ashcroft and Coulson's reheating of policy announcements:

Andy Coulson, the party’s director of communications, has asked Shadow Cabinet ministers to “find new angles” on existing policies to generate media coverage, according to insiders.

How does this differ from Labour? Tory handicaps aside, the leading party may face another hurdle. Whilst the leaders of the Liberal democrats may entertain a coalition with the Tories, their activists lean leftwards and dislike this trend. Rightwards at the top may be countered by activist co-operation with Labour at the bottom: Liberal Democrat support countering Labour's collapse in membership.

There is no deal to seal: there is only fractious squabbling as political parties battle over the crumbs. The election that will set the seal on Britain in the first half of the twentieth century is still some years away.

Debt, default and defeat: Global cooling in a new ice age

Debt smothers, strangles and suffocates economic activity. Like snow, it covers the landscape in a silent blanket that freezes all activity. We are living in a new ice age, a period of global cooling. This is a manmade contribution to the social environment, and thousands of business practices (“tricks” to the warmists amongst us) are at threat. We face a mass extinction, one that could threaten the very nature of capitalism itself.

Metaphor aside, the crisis is entering its third phase, the period when the weaker countries are picked off one by one. Today, Greece is facing its denouement. All of these words begin with de- : debt, default, defeat, denouement, deglobalisation, deceit and death. Words that will characterise the reportage of the next few years.

Yields on 10-year Greek bonds surged to 5.75pc, a spread of 254 basis points over German Bunds. Borrowing costs are nearing levels that risk setting off an interest compound spiral. The public debt is already 113pc of GDP. S&P said it is likely to reach 138pc by 2012. “The increasing debt-service burden narrows the scope for debt stabilization,” it said.

Fitch Ratings precipitated the Greek crisis earlier this month with a surprisingly harsh downgrade to BBB+, accompanied by a “negative outlook”.

It emerged yesterday that Greece had raised €2bn (£1.77bn) at a premium of 30 basis points in a private placement shortly after the Fitch move, avoiding the public glare of an auction.

Although this acts as a vice, there comes a tipping point of political and economic exhaustion. Without control over their currency and a dysfunctional economy, Greece faces perma-slump, a shift towards economic tundra, like the Soviet union. No political system based on assent has the capability of maintaining a permanent state of slump without radical steps towards socialisation or default. The European Union disallows both options.

Greece faces a hard choice, and one that the Eurozone will not abet. Hardcore members may find that the removal of a weak country is beneficial to overall currency union. But a crisis that tests democracy tests the EU itself. For, an initial condition of entry is a politics based upon consent (even if this is not replicated in the EU's own structures) and the age of default may be realised when the political class default from the promissory notes that they provided to the electorate.

Transhumanism and libertarianism: a weak case?

Is transhumanism predisposed towards libertarianism? In the IEET's use of the words associated with freedom and knowing location within Enlightenment values, transhumanism remains a broad church with an appeal to the left. Why is this so?

Firstly, the discourse of enhancement has become nestled within arguments concerning regulation and state provision, drawing upon existing academic work on the relationship between health, state and technology. Hence, the clear ties between transhumanism and the bioethics community. There is no rival school in the ivory tower.

Secondly, this institutional reliance on the left will focus upon positive notions of freedom, using the state to develop enhancement. Another drawback for a liberal approach: as its arguments cannot favour enhancement of humanity within the existing provision of health.

I am sure there are other historical reasons why the movement has shifted towards social democracy within its arguments, primarily based upon better organisation and mobilisation on the part of the Left. And that is a testament to their achievement.

Labour's hope: define, divide and win

When you listen to commentators on politics these days, the defining terms are narrative and definition. With time running out to a general election, both parties face pressure to refine their profile before the electorate and sell their stained wares. For now, the Labour party is making the running with policy announcements and dividing lines.

The new constitutional bill makes a very good example of this. Originally, the bill was designed to counter deficiencies in parliamentary practice and the democratic gap in the constitution. Yet, it has been burdened with Labour's edges, signalling in sirenic style to liberal democrats and mythical progressives:

The most luxuriant Christmas tree in Westminster is the Constitutional Reform and Governance Bill. Every week the Government has added new decorations to its sparse branches: first, on membership of the Lords; second, a post-election referendum on electoral reform; third, a tightening up of the regulation of parliamentary standards; and, now, controls on the tax status of MPs and peers. This is in addition to existing clauses covering the Civil Service, treaties etc.

This is where it all gets very political. The electoral reform clauses stand no chance of becoming law. They are meant simply to create dividing lines with the Tories and as a signal to the Liberal Democrats if there is a hung parliament. But all parties agree on sorting out the powers of the Independent Parliamentary Standards Authority, amending an Act passed only last July, and the civil service provisions should not be contentious.

Parliamentary reforms may now be deferred by an early election or the egregious clauses added by Broon. Does he wish to blame the Tories for the failure of this festooned monstrosity? If so, all of his beartraps reek of a single method: publicise dividing lines/benefit to the public/guarantees of spending and blame the Tories if these fail to pass the Commons gto be implemented.

You see this in the interviews where Labour Ministers demand that their opposition counterparts back them or, er, not. The sack them sub-routine is still owned by the electorate. There is no evidence that this approach has worked, but the bunker will try to claim victory for their methods in the poll recovery. Self-examination is not a strong trait amongst the brothers and belief in your methods will reinforce the spin and manipulation. It is more likely that public attitudes are too complex to model in this most troublesome of years.

We know only one truism: that before 2010 is out, Labour faces a 'back 'em or sack 'em' moment. Cameron has kept his powder dry or is supremely ill-advised. At some point, he will have to win back the narrative, as he did in 2008.

Is health reform death to a political career?

Is health politically toxic? Looking at healthcare in the United States, established health systems are very difficult to reform at a 'big bang' level. They acquire the status of a third rail, bringing illness to any political career. Hillary Clinton's final failure as a presidential candidate may have been sown in 1994.

The new threat to the centrepiece of his agenda came as Mr Obama's popularity sunk to its lowest level yet with a Rasmussen poll that gave him an approval rating of just 44 per cent – the lowest for any president at this stage of his first term.

Healthcare reform is either tinkering or must be completely radical. Cameron will look at Obama's experience and hug tight to his ringfence. If the NHS will not be reformed in this fiscal crisis, when will it be reformed... and note the loons who argue that we were able to set up a whole raft of entitlements in the last crisis, without mentioning that they thought the health dividend would reduce costs and limit demand. Our current welfare state would have driven the Webbs back to eugenics.

Further indicators for an early election

The economy is not the primary factor in support for the governing party. Perceptions of misery and prosperity will be linked to the ups and downs in disposable income. Nevertheless, a swing of the pendulum towards prosperity, even in the short-term, may have shored up Labour's support.

The Bank of England has reported that a quarter of households are better off, due to the decrease in mortgage rates and the soft increase in unemployment.

Data based on a survey of 2,000 households shows almost half of all mortgage payers have seen a fall in monthly payments of more than £100 over the last year, with almost a quarter benefiting by more than £200. The average works out at £130, the Bank says in today’s Quarterly Bulletin, its examination of financial markets.

The Bank feels the cushion provided for homeowners against the effects of recession, rising unemployment and the fall in house prices have made it easier for some householders to cope with debt problems.

Labour will hope that this prosperity is maintained, though it is dependent on Quantitative easing and deficit finance. Yet, they have to maintain this till May at the latest, subject to the greater possibility of adverse consequences. A gilts strike, a rise in inflation or some other event could destroy this fragile equilibrium, despite their hope for renewed growth. Another set of reasons for an early election.

Libya and Syria: illiberalism of a sort?

Rare is it to hear of potential rifts in Libya's regime: though we have been here before with Iran and Syria. Other countries endured spasms of liberalisation before returning to tried and tested methods of tyranny. Now it is Libya's turn.

Rifts within Colonel Muammar Gaddafi’s regime were laid bare at the weekend when Government agents cut short an unprecedented press conference on Libya’s human rights record that was supported by his reform-minded son.

Now, Libya is reported as a pattern of openness versus old guard. Usually this involves a hero, the one here is Saif al-Islam Gadaffi. But he has taken the role of patron: inviting the Times to the Human Rights Watch press conference. Note: you can only be invited to Libya.

More truthful would be the searching by an aging regime for a successful strategy of legitimation and succession. Syria tried this and opted for economic liberalism coupled with political repression. Chances are Libya will copy this model.