Unprecedented state intervention in financial markets has perhaps been the one of the worst aspects of all that has happened in the last 5 years. Perhaps I have to be careful what I wish for here, but I am still a firm believer in the free market and feel this is one of the linchpins of democracy.
In a deeply misguided reaction to the Credit Crisis, the general response was to provide “more of the same” rather than push through the desperately needed structural reforms. As a result of this the power of regulators has increased dramatically, while the bankers and politicians got away Scott Free from the consequences of their actions. Worse still, these groups connived to deliver the Libor scandal, the ban on short selling and, of course, the coup de grâce, the vast use of public funds to bail out the failed gambles of the finance sector.
Obviously, public funds have to come from somewhere. In fact no! They don’t come from somewhere they come through taxation. We must never forget this is why the global witch hunt on ordinary taxpayers is being pursued so rigorously.
Today provided a perfect reminder of how ridiculous the thoughtless interventions of the state have been. It was announced earlier that the UK has won the next battle in its campaign to curb the power of the European Union in its efforts to supress short selling.
And, of course, there is the other idiotic concept the socialist minded EU seems determined to introduce; the Tobin Tax. The Tobin Tax is the planned transaction tax on financial trading. From the outside it appears that the main supporters of this idea are those countries, which either dislike British dominance in European finance or expect foreign taxpayers to bail out their failed systems.
One of the key problems with both the proposed ban on short selling and the Tobin Tax is that they have been designed by people, who don’t have the first clue about how markets work. Instead it appears very much like their policies are, in fact, driven by envy. If I had to guess, I would say that their assumptions are that all those who trade make money, especially those in financial institutions. Therefore they should pay through the nose for simply participating in this game of supposed guaranteed returns. Alas, as we all know, this is not the case.
What is laughable is I wonder do these supporters of a ban on short selling even understand what short selling is?!
All this makes me wonder what other Draconian ideas will come creeping out of the woodwork as the memories of 2007 and 2008 fade into the distant past?
The proposed privatisation of Royal Mail
Moving on from super state sponsored socialism, today also brought news of one of the better economic episodes in recent memory; the age of popular capitalism introduced by the late Mrs T.
Finally, a British Government has grabbed the bull that is our beloved postal service by the horns and is dragging it kicking and screaming into the 21st Century!
To my mind, the sale of Royal Mail already sounds like it should be a big winner. Privatising the parcel delivery aspect of the service dovetails perfectly with the revolution that is online shopping. Royal Mail could become a much better provider of “picks and shovels” to the likes of Amazon. Would be “Sids” would then have the choice of “stagging” again or holding for the long-term as they did in the 1980s when the first wave of privatisations occurred. Interestingly, the minimum application for Royal Mail shares has been set at £750. Perhaps this exercise in selling off the family silver will not be quite as broad based as those of the past?