Steve Hemingway

I contributed a couple of mini-reviews to Amazon about books that made an impact on me. You should be able to read them here and here. These links may not work - Amazon doesn't make it particularly easy to link to a particular review. I think you can probably find them via my page as a customer on Amazon.

These are both books about China. I have quite a collection, but these are among the best. I plan to write another one about 'The China Dream' by Joe Studwell, which I'm currently reading. I have learned quite a lot from travelling to China, probably more by talking to Chinese people here in the UK and in Singapore, but probably most by reading books and newspapers/the internet. I am a firm subscriber to the theory that travel narrows the mind, and that travelling once to a country more or less guarantees that the traveller will never have a deep insight into that country. I am reminded of a relative of mine who travelled to the Philippines when Ferdinand Marcos was in power. She came back from the visit with an unshakable belief in the benevolence of Ferdinand and his then wife Imelda, dismissing my comments that he was a complete kleptocrat.

The papers are full of enthusiasm for Barak Obama. The young voted for him overwhelmingly, seeing in him a route to a better life for themselves and their fellow countrymen.

I am rather less enthusiastic. I have almost lost hope in governments making our lives any better, certainly in comparison to the cost of them in terms of taxes paid. To my mind, governments always always stand in the way of progress. I have recently found things I wanted to do blocked by governments. I am very cross about the need for me to have an audit for one of my companies at a cost of about twenty times the cost of the bookkeeping that is to be audited. I feel frustrated that I am not allowed to see my pension fund's bank account balance except through a very occasional paper statement. I am frustrated that the law requires me to make a mark with a pen on a hard copy version of my accounts when all the accounting that went into producing them exists in digital form. My heart sinks when my accountant gives me the soft copy of my accounts as a scan of the signed printout.

My bank still requires me to communicate to them 'in writing', which means that I have to print out and entrust to a very unreliable postal service the most important instructions I will ever send them. Because I no longer own a fax machine my bank told me that the only way I can arrange CHAPS or SWIFT payments is to send them a letter. In order to re-establish my company's ownership of a domain name I am required to fax a request to Nominet on 'the companies letterhead', even though the company has never never had any requirement to communicate by headed letter throughout the twenty-two years of its existence.

I am advised by a Barclays call centre operative that for my protection my 12-digit customer number for use in telephone banking has to be different to my similarly-12-digit customer number for internet banking. When I state that I can see no situation where my security could be improved by having different customer numbers for the two means of accessing a common account (identified by a six-digit sort code plus an eight-digit account number, both unrelated to my two 12-digit identification numbers) my comment is met with incredulity.

Security is one of those goods that is priceless, a human right that must be provided regardless of cost. This way leads to the war in Iraq, the 'war on terror', the absurd expense of the department of homeland security, the incredible difficulty these days of doing ordinary transactions, and, spectacularly the use of the Anti-terrorism, Crime and Security Act 2001 to seize the assets of Landsbanki in the UK, which seems to have passed without serious comment from the press or the public.

This article, based on the Analysis programme to be broadcast tonight on R4 shows how in modern political debate no problem must be acknowledged to be difficult or impossible to solve. In fact politicians require every possible political problem to be solvable by a policy capable of being expressed in a soundbite of a handful of easy-to-parrot syllables. And Hazel Blears wonders why bloggers' responses are cynical.

The Wikipedia article on the crisis grows by the day. The FT is constantly filled with news about the latest manifestation of the collapse in demand.

What worries me is that at times of crisis we look to strong men to lead us out of the mess. Arnold Kling in his recent podcast on Econtalk made the point that actually there is no economic theory to guide the likes of Hank Paulson, Ben Bernanke, Mervyn King, Gordon Brown et al. and that they really are making it up as they go along. Although it seems reasonable to preserve the financial system to allow the essential function of allocating capital and facilitating funds transfer and avoid the heavy costs of unwinding complex derivatives contracts entered into by failed investment banks, it is not clear that a transfer of huge sums from future taxpayers to the owners (and increasingly) to the managers of the banks is such a smart move in the long run.

The accepted wisdom in the 60's when we were faced with inflation was strong action. Similarly the problems of de-industrialisation in the UK at least, in the 70's, were addressed by industrial policy. The Great Depression lead to the setting up of a lot of institutions, including agricultural subsidies, Fannie Mae and Fanny Mac, and a mass of government intervention into private and public life that has never been reversed.

Looking at the home front, I am incandescent with rage that the utterly useless UK banks, which have treated their customers with undisguised contempt, and pursued a policy of ruthlessly reducing the pay (and therefore the quality) of their staff for years. I am indebted to Prof Robert Shaw for explaining how this works in his letter to the FT today.

It seems to me that what we need is not more regulation of banks, or indeed more subsidies, but more competition. The key to that is reducing the huge barriers to entry that still exist in running a bank in the UK.

The title of this entry is not likely to entice the casual visitor to read on. I don't suppose that 0.05% of the population of the EU have ever thought about carbon steel fastenings, let alone how many are imported from China, let alone what the EU Trade Commission decide about the pricing of these things.

I didn't until I discovered that no Chinese factory will quote for fastenings to be supplied to the EU. Even plasterboard kits, with the board itself, channelling and fastenings, are impossible to obtain quotes for. It is remotely plausible that the Chinese really are seeking to destroy EU factories making nails, but it's hard to imagine that this is a more plausible explanation than that Chinese factories have such a huge advantage in terms of currency exchange rate and the costs of all factors of production that they can indeed sell for less than the marginal cost of production in EU factories, especially in high-cost economies such as Germany, France, Italy and the UK.

The result is that competition is destroyed and we have all ended up paying more for everything that is produced using these fastenings. Maybe this was a price worth paying for the jobs that have been 'saved'. But undoubtedly the finished goods manufacturers who had to bear these higher costs of fastenings will have laboured under the disadvantage of a higher input cost and a reduced competitiveness. Who can really say whether the consequent reduced production in these industries will have been less, in terms of employment, than the higher employment in the fastenings business?

Maybe I'm missing something. I am certainly no economist. Maybe the inscrutable Chinese really have a cunning plan to flood the EU with cheap screws and nails, then, when all the West Midland nail factories have gone under, suddenly increase the price of nails and bring our economy to its knees. From what I can tell, borrowing from our banks would have been a much more effective way of doing that.

Of course, the Commission, in its infinite wisdom, have seen fit to keep the proposal out of the public view. It is possible that an email to trade-ad-fasteners@ec.europa.eu requesting a copy will produce one. Why this might be possible when the document has not been posted on a website will remain a mystery to me until the day I die, I'm sure.

This blog gives an update to the e-gold saga.

I have been a member of e-gold for a long time, but I haven't used it for anything serious, mainly because of a lack of counterparties. I was reminded of it when I listened to Russ Roberts latest podcast. It seems very odd to me that national central banks remain a nationalised monopoly provider of money. It seems obvious that there are plenty of candidates for money, and that the 'modern' reserve banking, with arcane rules for money creation all centrally controlled by a central banker, or cartel of them, can't be the right way to ensure good banking. The latest crisis certainly strengthens this conviction.

Anyway, I would recommend listening to Russell interviewing George Selgin about free banking (i.e. unregulated banking, not the absence of explicit charges for running current accounts). It's fairly clear that Russ doesn't 100% understand what George is talking about, which is what I think makes the Econtalk podcast so good. I should probably listen a second time, because I certainly got lost at various points. My previous experience of doing this, with other podcasts, though is that I am bored for most of the time and fail to understand exactly those points I mis-understood the first time through. Maybe I should get the book.

Traditional banking is occupying my hours a lot a the moment, certainly too many for me to spend long writing this. So I'll have to stop.

As I understand it, Schumpeter coined the term 'Creative Destruction' in relation to the need for new players to provided new products and services and thereby raise the productivity of the economy. The idea was that it was necessary for pioneers like Henry Ford to see the potential of the motor car, and to create firms that provided it, because firms that made horse-drawn buggies would just never adapt to the new technology, no matter how clearly individual managers saw the advantages of the new technology.

I checked on Wikipedia and discovered that Amazon, still by a large measure the largest of the online retailers, started selling books online in 1995. Clearly there were a lot of websites running before this, but Amazon had to solve problems of authentication, secure payments, identification of customers etc. which were not needed by the likes of Yahoo!. Twelve years on, banks, whether in the UK or Hong Kong, behave as if the revolution presaged by Amazon never happened. I find that to do some simple transactions from my Hang Seng account in HK I have to send pages of paperwork. Admittedly the forms may be downloaded and printed by me, but I still have to sign them with a pen, provide a copy of my ID and post them to a branch.

This clinging on to old ways of doing business would doom banks like Hang Seng (a wholly-owned subsidiary of HSBC, not exactly a minnow), if Amazon ever entered the banking area. However the heavy regulation of banks ensures that the barriers to entry are just too high. So customers are stuck with a 70's banking environment in the 21st century. Call centre operatives the world over seem to be programmed to explain that these outdated ways of operated are for the customers benefit ('for your security') although clearly they are no such thing.

It seems to me that the time is over-ripe for a proper, free, narrow, commercial, global, internet bank to emerge. The current situation is akin the the Mediaeval guild system where the incumbents reap large economic rents from their state-awarded oligopoly position. The amazing thing is that we just don't seem to care.

Downing Street are taking the unusually brave step of actually engaging with the public, albeit only through YouTube. The idea of "Ask The PM" is this: think of a question you would like Gordon Brown to answer, then post it on YouTube and the most popular entries will be answered by the Prime Minister himself. The above short clip is designed to force GB to justify his policy.

Note that I am not necessarily opposed to a wealth transfer from my generation to later ones.

I have used Flickr for a long time. I usually upload my shots there. You can see them here.

I have also used Picasa for a long time. I am not capable of using proper photo processing software, although now there are some amazing pieces of software around, including Portrait Professional, that even I can use to make ugly people like you look like models.

The problem with Flickr is that there is no integration with Picasa. Whereas there is a button in Picasa to upload to Picasa Web Albums. And Picasa Web Albums is integrated with Google Maps, so I can easily tag my photos with locations.

The result is the following:

From Long Walk

The 798 District of Beijing is a fascinating place. The artists who work there are truly talented and original. Not all of them, but a good number of them. This sculpture is a particular favourite. The artist, whose name I don't know, I'm afraid, is very famous, at least out there. If you know it, please comment with his name. Meanwhile, just enjoy the image:

http://blogs.ft.com/maverecon/2008/11/another-poke-in-the-eye-for-freedom/

Willem Buiter is fast becoming my favourite blogger. This post is outstanding. His European perspective is a wonderful antidote to the UK-centric line that most columnists take.

It is very sad that no opposition party has taken this issue with more force. As Buiter says, all governments have form. It would be wonderful if a serious politician could write the following, or even something approximating its sentiment but in less eloquent terms.

Soon after gaining office, the joys of secrecy, suppressing information and denying access to information are discovered. An awareness grows that openness and accountability are nuisances which can be avoided or made more tolerable to government ministers by restricting the public's information. It also becomes apparent to government ministers that the defence of the national interest and the safeguarding of national security surprisingly often (and no doubt regrettably!) require that information be kept secret that would be politically embarrassing to the government or the ruling party or personally embarrassing to individual members of government, were it to come out. This miraculous congruence of personal, private, party-political, public and national interests becomes a self-evident fact to politicians of any ilk, soon after their party gains office.