Northern Rock and the Taxpayer
Press coverage of the Northern Rock, credit crisis, etc has been all over the place. Business editors of newspapers are suddenly experts on monetary policy, able to tell Ben Bernanke how it should be done. There's been almost no consistency either, with sometimes the same article appearing to both demand government intervention, and attack it. On the whole there has been much criticism of the Fed -
This was a particular favourite.
Alan Greenspan, the Fed chairman's celebrated predecessor, spent 20 years putting off the day of reckoning by cutting the cost of money at the first whiff of trouble.
TWENTY YEARS putting off the day of reckoning? So it should have been in 1987, 1988, 1989 and so on? Given the US economy must have nearly doubled in size in those 20 years I suspect almost everyone would take the putting off, rather than the apparently desirable pain.
This story quotes the Taxpayer's Alliance. I have some sympathy for their view, although the political realities were such that I doubt any government would follow the course they suggest. My concern though is that the Times calls them an 'organisation representing British taxpayers'. I think this should be 'organisation that purports to represent British taxpayers' at the least, unless they have a huge mass membership I am unaware of.
Labels: economics, finance, monetary policy, Taxation
Nationalisation of UK companies by foreigners
We've been discussing this over at
Tim Worstall's in response to
this Observer editorial.
The Observer's argument is that very few people desire major nationalisations by the UK government of leading British companies, so why is it ok for foreign governments? Tim says he's fine with almost any such deal, and the distinction is that these purchases are for profit only, and thus mimic a market transaction, whereas a domestic nationalisation is usually for wishes to politically direct the company or (and also this is missing from from foreign control) a whole industry.
This is the main issue - in the 1990s governments used to fret about the bond market, but now although China owns a fair chunk of US public debt the US government seems quite relaxed (at least publicly) - presumably because it doesn't seem to sell them or threaten to sell them again. But can we be that relaxed about equity ownership, particularly as it is likely to grow as countries try to diversify from US Treasuries? Tim himself draws the line at defence contracters (presumably not the US or other allies though) and North Korea (for anything). Issues of national security led some commenters to say they wouldn't want Russia to be in charge of our energy generation. Hands-off governments could become hands-on ones if it comes to a decision between shutting a factory in the UK and one in their home country.
National security is a grey area. In a sense the UK as a country has ultimate control of corporate assets within its borders, foreign-owned or domestic-owned. It can alway nationalise foreign assets, and there's little the other government can do (remember Suez), although presumably there could be damage done before that.
Political interference of an economic or financial sense in those companies owned by foreign investment funds looks unlikely at the moment. It cannot be ruled out though, and even a minor level one would imagine is as bad as the British government doing it (assuming you are a free marketer). And how do you then stop it?
I also wonder whether the source of funding is as irrelevant as Tim says. What if British companies start lobbying (or bribing - illegal I think but Tim would say it shouldn't be) the Chinese or Russian government to help them in takeovers of other British companies. Surely that isn't a level free-market playing field and the outcomes (from a market point of view) could be very unsatisfactory.
Update: Well look at that - an
example turns up as I'm writing the post.
Labels: economics, finance
