Happy new year

No posts until Wednesday, I'm afraid, as it's Jewish New Year.

Shana tova!

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Too true

Disney's latest (via Andrew Sullivan):

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Make the bad good

The always perceptive Tyler Cowen gets to the heart of the matter:

Let's say you have ten banks and two of them are insolvent.  But you don't yet know which two.  So the credit market is messed up for all ten because at some sufficiently high level of risk credit just shuts down.  The goal then is to reveal which two of the ten banks are insolvent.

I've been thinking of all those old puzzles where a bunch of guys enter the room and only so many of them have smudges on their foreheads and you have to find the algorithm to reveal that information.

What can be done?  Temporarily allow insider trading, with short selling of course?  (Bryan Caplan's idea)  Make executives either resign or post personal bonds, where default of the bond follows if the bank ends up insolvent?  Change laws and make banks exhibit their books to the public and let traders sort it out?

I don't know.  But maybe sorting out the bad banks is one alternative to finding and isolating the toxic assets.  Because once all the remaining banks are good and known to be good, the problem of toxic assets no longer seems so paralyzing.

I'm still not sure that the Treasury buying bank assets is to best way to make this sorting, and that's leaving aside the price tag.  In fact maybe Treasury buying postpones this revelation of information.

Of course if eight of the ten banks are bad, maybe we don't even have the luxury of asking these questions.

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The Laffer curve in action

Fraser has an incredibly important post at the Coffee House, on tax yield. Do read it all, but this is the crux of the matter:

The richest 1% of this country pay 23% of all income tax collected (table here) in 2008-09. The richest 5% pay 42% of the tax. These ratios should warm the heart of the most ardent redistributionist. Brown’s wise refusal to raise the top rate of tax has seen the richest shoulder a greater share of the burden. In 1999-00 these ratios were 21.3% and 39.6% respectively. I credit Brown with doing this knowingly: he knew that to get the richest to shoulder a greater share of the burden, you don’t raise the top rate of tax. It was precisely his hunger for tax, I believe, that led his refusal to raise the top rate.

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UK support for Israel is in danger (Jewish Chronicle)

I have a piece in this week's Jewish Chronicle on the likely change in British policy towards Israel. Here it is:

Both Israel and the US are about to get new leaders. So it would seem a tad unfair for us to be stuck with Gordon Brown for much longer. But with the latest poll showing a 28-point Conservative lead and Labour on course to lose the Glenrothes by-election, the removal vans may well soon be drawing up at Number 10. So the question is: how will the new brooms affect British policy towards Israel?

What is certainly clear is that no British prime minister is going to be as good a friend to Israel as Tony Blair. Remember: it wasn't Iraq that finally forced him out of office. It was the Second Lebanon War. Almost alone in the world, Blair refused to criticise Israel and championed its right to defend itself from terror. As the war dragged on, even the Americans started to condemn Israel's supposedly "disproportionate" response to Hizbollah. But Blair stood firm in support. And it was this, in the summer of 2006, which finally did for him, as Labour backbenchers plotted to remove him and many in the Cabinet made known their opposition to his stance.

This matters not just for historical interest but because it shows how any future Labour leader is likely to behave. Labour Friends of Israel may hold one of the best-attended receptions at the party conference, and it does a superb job at putting Israel's case within the party. But the tide long ago turned within the broad mass of the Labour Party away from its once instinctive sympathy towards Israel. The reasons for that are complex but run parallel to the spread of anti-Americanism and the Western self-loathing of so many on the left. Whatever the cause, the default position within the Parliamentary Labour Party, let alone the Labour Party at large, is now to view Israel as the main obstacle to peace.

Unlike Blair or Brown, the next Labour leader will be elected from a position of weakness. Blair could afford to ignore the rest of his party as he brought three landslide election victories. Brown, as the yearned-for hero over the sea, could initially have told his party that little green fairies were the answer to the Middle East's problems and been hailed as a sage; and he makes repeated references to his family and emotional ties to Israel. But the revelation that he was all hype and no substance has added political impotence to his incompetence.

Whatever the exact circumstances of Brown's departure, the next leader will be brought in to mitigate a disaster. He or she will have to work with, not in spite of, the party. And that means that the approach to Israel will be different, even through the filter of diplomatic language. Government policy will not do a volte face, but there will be much less reluctance to criticise Israeli policy and a greater readiness to imply that it is Israel which is the real block to peace. The priority for the next Labour leader, whether it is Miliband, Straw, Johnson, Harman or Uncle Tom Cobley, will be the need to seem unified, purposeful and new. Avoiding a Labour civil war means carrying the party. And that means pandering to the anti-Israel consensus.

The international context for a new leader will also be different. Although McCain is a resolute supporter of Israel, Obama's foreign-policy team is overwhelmingly hostile. Obama himself seems naively convinced that talking to terrorists and terror states will bring them to their senses, rather than acting as a demonstration of the West's spinelessness.

In the 1980s, Reagan and Thatcher spurred on each other's tenacity; in the 1990s, Bush and Major were steadfast against Iraq; and in recent years, Bush and Blair showed great resolve against terror. But Obama and a new Labour leader would, almost certainly, push each other in the opposite direction, feeding off each other's notion that Israel is the roadblock to peace.

The dynamics under Obama would be very different. Blair was constantly attacked as Bush's lapdog. In reality, they acted in concert because they simply agreed on the big picture. A weak Labour leader would, alongside Obama, be far more of a lapdog, with a limp UK foreign policy tugged along by an irresolute president.

The chances are, of course, that a new Labour leader would be a mere caretaker until being turfed out by the Conservatives. But there is little sign that David Cameron would be much different. As his Shadow Foreign Secretary, William Hague joined the anti-Israel bandwagon in 2006, criticising Israel's "disproportionate" behaviour in Lebanon. And Cameron himself has made a series of worrying speeches, not the least dreadful of which was made on the fifth anniversary of 9/11, in which he argued that recent foreign policy lacked "humility and patience" and that the US and UK viewed the threat from terror in "unrealistic and simplistic" terms.

The gloomy prognosis is that the chances of a new prime minister with a serious understanding of Israel and its place in the fight against terror are close to zero. Happy New Year.

 

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Clanger

Oh dear. One's confidence in the accuracy of a profile of Policy Exchange collapses when, at the start, it has this howler:

Nicholas Boles, Browne's predecessor as Policy Exchange director, is the Conservative candidate for Grantham, Margaret Thatcher's old seat.

Still, no surprise in the Grauniad.

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Palin's awful interview

Oh Lord. THis is excuciating. Excruciating.  (The last line is cringe-makingly embarrassing.)

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Changing times

A wonderful spot by Patrick Hennessy. (Do read the first comment on his blog, too.)

Dear All,

In the future we would be very grateful if you could refer to Duke Street Capital as Duke Street following a recent re-branding exercise at the firm.

Kind Regards

Clare Simonds
Consultant
Equus

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Eh?

Just a thought (alebit about three days late). 

If this is no time for a novice, why is Gordon Brown endorsing Barack Obama?

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Ben and Jerry - ugh

I always avoided buying Ben and Jerry ice cream. There was something insufferable about their claims to 'right-on'ness and their 'we're not like other producers' shtick. So when they sold out to Unilever I smiled; yeah, right, mateys - when the multi million dollar cheque's waved in front of you, you grab it as fast as you can.

I could buy Ben and Jerry's with a clean conscience.

But they are clearly just as smug and wannabe-hippy as ever.

Were they to take notice of this, their sales would collapse, I imagine, to nil:

VERMONT -- People for the Ethical Treatment of Animals sent a letter to Ben Cohen and Jerry Greenfield, cofounders of Ben & Jerry's Homemade Inc., urging them to replace cow's milk they use in their ice cream products with human breast milk, according to a statement recently released by a PETA spokeswoman."PETA's request comes in the wake of news reports that a Swiss restaurant owner will begin purchasing breast milk from nursing mothers and substituting breast milk for 75 percent of the cow's milk in the food he serves," the statement says.PETA officials say a move to human breast milk would lessen the suffering of dairy cows and their babies on factory farms and benefit human health.

"The fact that human adults consume huge quantities of dairy products made from milk that was meant for a baby cow just doesn't make sense," says PETA Executive Vice President Tracy Reiman. "Everyone knows that 'the breast is best,' so Ben & Jerry's could do consumers and cows a big favor by making the switch to breast milk.

"In a statement Ben and Jerry's said, "We applaud PETA's novel approach to bringing attention to an issue, but we believe a mother's milk is best used for her child."

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