Now can we please talk about something else?

Mark Littlewood has it right: the BNP lost.  The man looks like Billy Bunter (see Matthew Freud in the FT). And I think the BBC made the right decision.

In the meantime, Lib Con had two interesting posts: one, that calls Political Blogging the Highest Form of Journalism.  This makes me wonder, again, why think tanks don’t make a better fist of it.  A lack of typing speed, perhaps.  And a really excellent long discussion of the downsides of open primaries.  This strikes me as an excellent point:

There is a real risk of voter burnout once the novelty of open primaries has worn out. In a seat like Brighton Pavilion you could be looking at four or five primaries minimum then the General Election itself. There is evidence, particularly from the United States where some citizens vote on dozens posts and initiatives annually, that the more things people are asked to vote on, the less likely they are to vote. There can be too much of a good thing.

Now, the Mervyn King Alistair Darling Bust Up.  Who do I side with?  No question: Darling.  Well, Darling and the FSA.  I find the idea that we can put a clever dividing line down the middle of banks and thereby assure ourselves of their non-goingbustingness in future rather naive.    The Guvn’r comes back and says that we don’t know how much capital is enough:

And rather than pay out dividends or generous remuneration, banks should use earnings to build larger capital buffers. But how much larger? We simply don’t know. A higher ratio is safer than a lower one, but any fixed ratio is bound to be arbitrary.

Look, Lehmans and co were leveraged forty or fifty times. If they had been leveraged 10 or 20 times the bust would have been much smaller.  They would not have been affected by a new Glass Seagall, either.  As everyone keeps pointing out, the big headlines from this Crash have all been sitting firmly on one side or the other: NRK, HBOS, Washington Mutual.   Only Citigroup have really straddled.  The banks most likely to be affected by a global Glass-Steagall are the massive European ones.  Now that could be a funny phone call to the supposedly virtuous Germans. . . .

Martin Wolf’s verdict is as ever spot on:

If we moved back to a Glass-Steagall distinction (itself never accepted in continental Europe), we would need to draw a line. But where? Why would lending to households and business be good, but securitising those loans bad? Why would hedging be good, but speculating bad and how might one draw the line between them? Mr King counters that prudential regulation already draws such distinctions. I would respond that regulation has made a mess in doing so. Furthermore, these are not distinctions between businesses.

Hamish McRae adds ten interesting points to the mix.

I enjoyed the article in CentrePiece about the minimum wage.  See my earlier post.  They mention monopsony as the reason there is not a straightforward a priori reason to think that a MW necessarily leads to lower L.  That’s all I’m saying: it is not just about labour demand. It needs empirical investigation: it can’t be established a priori.

For those mad-eyed monetarists who think liquidity is the answer to all our problems, two points:  One, the ECB is now finding it is offering more liquidity than the market wants. DEMAND, DEMAND is the issue. Two, if the liquidity is NOT going into nice Aggregate demand, where might it be going?  Asset bubbles.  And Gillian Tett is worried!

In the corporate bond world, for example, spreads have collapsed for both risky and investment grade credit. Emerging market spreads have shrunk too. Meanwhile, publicly-traded real estate markets (the EPRA index) have soared some 70 per cent, according to Barclays, helping to spark a surge in its overall measure of market risk appetite . . . Yet, if you talk at length to traders – or senior bankers – it seems that few truly believe that fundamentals alone explain this pattern. Instead, the real trigger is the amount of money that central bankers have poured into the system that is frantically seeking a home, because most banks simply do not want to use that cash to make loans . . . is crystal clear that the longer that money remains ultra cheap, the more traders will have an incentive to gamble (particularly if they privately suspect that today’s boom will be short-lived and want to score big over the next year). Somehow all this feels horribly familiar; I just hope that my sense of foreboding turns out to be wrong.

Very well put.