Iceland goes bankrupt

I wonder which will be the next currency to go down:

People go bankrupt all the time. Companies do, too. But countries?

Iceland was on the verge of doing exactly that on Thursday as the government shut down the stock market and seized control of its last major independent bank. That brought trading in the country’s currency to a halt, with foreign banks no longer willing to take Icelandic krona, even at fire-sale rates.

As the meltdown in the Icelandic financial system quickened, with the government seemingly powerless to do anything about it, analysts said there was probably only one realistic option left: for Iceland to be bailed out by the International Monetary Fund.

That thumping sound you here is Jamie and I pounding our heads against the tables, having missed the opportunity to short the krona. I have to admit, though, I don’t think I was actually aware that Iceland had its own currency before yesterday. Some people in Britain are getting badly bitten by this one; it’s going to have a knock-on effect in the UK. And it’s not often that you get to bet against a paper money being flushed down the toilet, although we’ll probably get another opportunity soon enough.

Suddenly, that crazy concept of a gold standard doesn’t look so crazy anymore, does it. Why is the IMF in a position to help? Simple. They’ve got 103.4 million ounces of gold on hand, which is worth $9.4 billion these days, or, if you prefer, an infinity of krona.

Barack Obama is a socialist

Not that this is actually news, but the evidence has finally begun to leak out into the blogosphere. It’s clear that he was a member of the New Party in 1996 and it appears he may have also been a member of the Democratic Socialists of America. This doesn’t matter much for the election, given that his appeal is emotional, not rational, and his opponent favors socializing the banks and housing market anyhow, but at least it will give those of you who live in the USA some idea of what you can reasonably anticipate from his administration.

Austro-logic and the stock market

As a few of you have correctly ascertained, the question to which I took exception to the asserted “Austrian” position and instead chose the “socialist” answer was Question 20: “What is the Function of the Stock Market”. The “Austrian” answer was as follows:

The stock market constitutes a vital part of the process by which we coordinate production. Stock market prices reflect the productivity of business firms as well as entrepreneurial judgments concerning future productivity. Competition in stock markets enables us to ascertain the value of real investment. Takeovers, mergers, and insider trading are wrongly maligned because these practices represent real competition. Without the stock markets, rational coordination of production in modern society would be impossible. Governmental regulation cannot improve on the workings of stock markets because it is the market that most directly informs us regarding the best use of resources.

This statement is rife with errors. First, to explode one possible defense, the question is quite clearly referring to the particular entities known as stock markets; it is not a general reference to trade in the ownership of the means of production. Otherwise, this question could have just as reasonably been entitled “What is the Function of the Fruit Market?” It’s important to remember that a publicly-traded stock is itself a government creation, as it represents a percentage of a government-created entity known as a corporation and as such inherently represents government interference in the free market. To argue that there is no place for government regulation of an entity that government has itself created is intrinsically illogical.

As has become increasingly obvious, stock prices may in part measure corporate productivity, but they rest far more on other elements, most significantly inflation of the money supply. And it is downright false to assert that “rational coordination of production in modern society would be impossible” since the fundamental irrationality of the stock markets currently inhibits production; there is no evidence that it coordinates it in anything approaching a rational manner. It is certainly true that the free market is the best provider of information related to the complex calculation of intersecting values, but the point that the Austrians who concocted this answer appear to have missed is that the stock markets no more represent free markets than NAFTA represents free trade.

The truly Austrian position would be to reject the concept of government-created artificial persons in favor of historical free partnerships which sell shares to anyone willing to buy them through any mechanism it cared to sell them. Some form of recognizable bourse would surely evolve from these operations, but there would be no artificial limits on which organizations were permitted to sell shares through them, much less the bevy of government restrictions that currently exist.

The “socialist” answer, on the other hand, is demonstrably more correct. Only the last sentence is incorrect, but it doesn’t have anything to do with the actual question of the stock market and its functions and so can be safely disregarded. There’s nothing socialist about the rest of the answer except for the mention of “class”, which is not identified with any of the actual Marxian class divisions; the rest of the assertions made are undeniably true in the context of a government-regulated entity managing the trade in the ownership of other government-created entities.

The stock market represents the interests of an unproductive class in society. The investor class profits off of the labor of others, while roping the public into the system through investing schemes. Stock market speculation, insider trading, takeovers, and mergers, work to destabilize the economy. Financial acquisitions concentrate control of the means of production in the hands of a few. Bull markets produce no real wealth, and are really financial bubbles. These waves of stock market speculation lead to financial panics that disrupt the production of real wealth. What we need are not more high-flying financial centers but more common work at the local level toward common goals.

VPFL Week 5

63 Alamo City Spartans (5-0-0)
48 Greenfield Grizzlies (2-2-1)

63 Silver Spooners (2-1-2)
45 Valders Valkyries (4-1-0)

66 Burns Redbeards (3-2-0)
63 Masonville Marauders (1-3-1)

65 Mounds View Meerkats (3-2-0)
50 Judean Peoples Front (2-3-0)

61 Black Mouth Curs (1-4-0)
52 Winston Reverends (0-5-0)

This appears to be somewhat of an odd season. I had all three of my keepers sitting on the bench this week. None of them have performed well yet this year, I haven’t scored a ton of points, and yet I’ve gotten off to a much better start than last year when I couldn’t buy a win. Alamo looks like the team to beat; I find Reggie Bush’s performance to be more than a little annoying considering that I had him for two years and he was rarely worth taking off the bench.

Strangling the future

An English columnist notes the probable conclusion to these economic “rescues”:

A quarter of a century ago, in the era of the Labour manifesto that was dubbed (by a member of the Labour shadow cabinet) “the longest suicide note in history”, when one wanted to depict the absurdity of the view of the world advanced by Tony Benn and Michael Foot one simply had to say: “They want to nationalise the banks!” People fell about laughing.

Today, it is all considerably less funny. We are all socialists now.

For the Government to take stakes in our leading banks in order to re-capitalise them is not quite the sovietisation of Britain, but it is a pretty good start. Given the instinctively socialistic leanings of our Prime Minister, it may well have been a move he undertook calmly and, quite possibly, with a little excitement. Perhaps the consequences of his not having socialised our financial system in this way could have been catastrophic – a view taken not just by his closest Cabinet colleagues but also by the main opposition parties. Equally, the consequences of his having done so could be catastrophic, too, because the socialist experiment rarely ends up with people feeling happier, richer and more free until it has ended.

Anyone over the age of 40 will recall the abiding result of the days when we had a socialist economy in this country: poverty. We had better prepare for some more of that.

Fortunately, the USA isn’t going to take any steps that overtly socialist, because we’re fortunate to have a strong, Reaganite conservative, George W. Bush, at the helm instead of a Scottish socialist like Gordon Brown… hang on, strike that thought.

One can only conclude that one of my Australian friends was prescient a few months ago when he said, prior to the first bailout in the ongoing series: “Amerikih is f—–!”