Tuesday, June 28, 2016

High Plateau Drifter on Brexit

Throughout the Brexit campaign I have been at a total loss to understand the panic by the media and financial industry at the idea of the EU losing its grip. After all, the EU is just another expensive bureacracy that produces nothing. Its regulatory efforts are the opposite of free trade, interfering with comparative advantage, and imposing restrictions on commerce like a supersized medieval guild administrator. (Englishmen are no longer able to fish in half of their territorial waters, nor to grow certain breeds of apples, for example.) I see nothing but cost savings and economic advantages to its demise.


Taylor Conant said...

We here that the effects of Brexit are somewhat indeterminable due to the scope and complexity of the EU and its various subsidies, taxes and regulations. This is offered as an argument against Brexit-- the voters can't possibly be informed enough to vote intelligently in a binary manner.

But really this seems like an argument against: representative government specifically, and government (aka central planning) generally, and the EU as a complicated social institution. If the people can not vote "yes" or "no" for a complex institution, they also can't wisely vote "yes" or "no" for individual representatives who are somehow to be tasked with the impossible in developing a principled view of all EU activity. Similarly, if the EU is so colossally complicated that average voters can not really figure out what its up to at a given moment, there is a very real chance it does more harm than good and no one has any way of knowing when it is doing that.

It's not Occam's Razor, but it's close-- the better principle of governance is to reduce such risks by exiting these massive institutional frameworks when the option is available. A corollary is that the option should be created more frequently than it currently is and such referenda should be normalized, not a radical part of the political discourse.

Taylor Conant said...

"We hear*..."

High Plateau Drifter said...

"It's not Occam's Razor, but it's close"

This notion that war between the nation states of Europe can only be prevented by self selected and self appointed bureaucrats is absurd on its face. Ultimately the unfairness of production quotas, regulations and allocations of economic rights decided by these self selected bureaucrats will cause conflict rather than prevent it. Where are John Stuart Mill and David Ricardo when you need them??

Taylor Conant said...


Correct, it is a false dichotomy. To say the politicians do have the free will to create voluntary (in the sense that they agree to enter into them) regulatory structures, but they do not have the free will to avoid violent conflict as a policy decision is clearly a ploy to obstruct clear thinking about the issues and the "inevitability" about certain outcomes. And the idea of a system by which each signatory takes turns playing victim and oppressor in trade deals being a guarantor of peace through trade is transparently worse than a system of true free trade where exchanges only occur when each party thinks they're getting a good deal and no party is required to be the victim or the oppressor.

CP said...

But who will decide what kind of apples people can grow in Europe?

Taylor Conant said...

Another puzzling outcome of the post-Brexit controversy is that if the EU is too complex to make an intelligent decision about leaving, it is also too complex to make an intelligent decision about staying. So that argues for some kind of "EU-limbo" land as existential reality, not a decisive move to stay or leave.

In addition, if the UK (or any other country) votes remain, is that indefinitely binding? I am surprised no one has made any allusions to the political arguments of the American War Between the States given that "indefinite detention" in a political union once committed to originally was one of the central casus belli of that conflict. Since everyone is so eager to avoid a European War, wouldn't everyone want to find a peaceful way to settle secession?

Taylor Conant said...

Just found this on Mish's blog: https://mishtalk.com/2016/06/28/no-cherry-picking-says-merkel-risk-of-trade-collapse-says-mish/

In a speech to the Bundestag on Tuesday morning, Ms Merkel spelt out to London that the EU’s internal freedoms were indivisible — if Britain, like Norway, wanted access to the internal market then, like Norway, it would have to accept freedom of movement.

“We will ensure that the negotiations will not be run on the principle of cherry-picking,” the chancellor said, drawing applause. “We must and will make a palpable difference over whether a country wants to be a member of the family of the European Union or not. Whoever wants to get out of this family cannot expect that all the obligations fall away but the privileges continue to remain in place.”

This is kind of a dead giveaway that the EU isn't about free trade but rather its opposite. If you're really a supporter of free trade (especially as a method for preventing war), then you don't condition access to trade and markets on accepting other policy proscriptions. That would be called "regulated trade" not "free trade". There is similarly no case to be made that non-signatory nations need to "pay the costs" and "bear the burdens" of a policy of free trade. Free trade comes with no costs-- it is politicking that involves deadweight loss and the assumption of social burdens that otherwise don't exist. Putting up barriers to trade imposes costs, not only in the lost trade opportunities but in funding the regulatory apparatus that obstructs trade. Free trade "pays its own way" by nature of the fact that if it doesn't, the two parties don't come together and exchange because it isn't worth their while.

Me and my grocer are not signatories to any free trade agreements and that's precisely why it's easy for us to do business with one another. This is a very simple concept that anyone who goes to a grocery store or other food merchant can understand and apply to any other area of commercial exchange. You have to #TryHard to screw it up with fancy arguments about the need to exchange the right to free trade with some central immigration scheme.

Anonymous said...

I will bring a dissonant voice. Self-confirmation is not good to test assumptions. Like you Iam forsmaller government. But no need to invent other arguments tojustify leaving the EU.
First, english apples make for a nice story but it is just a urban legend. Too bad that fact-checking is not part of High Plateau drifter toolkit,or since I can't believe that, he just disregards the truth to fit his narrative. http://blogs.ec.europa.eu/ECintheUK/euromyths-a-z-index/
The main thing about the EU is that it is complicated and here I agree that Mr Conant that if nobody understands what it is doing, things should change.
If I should go against a few affirmations
-the EU is run by self-selected bureaucrats -> The power is with the European Council (ministers who have been elected in national elections) and the European Parliament (also elected,actually in most country the only place where EU-opponents manage to get elected).
-The costs of the EU : minimal as a percentage of net contributors budget (net contribution of Germany is 6bn)
-the EU is against free-martket : actually the only powers of the EU are toimpose free circulation of goods and people. This lead to more competition in the labour force and hate towards eastern europeans in western countries. I also think that the antitrust authorities do a good job. Results of this includ very low-cost of internet/phone subscribtion due to the intense competition.Regulations in Europe are health and safety regulations to ensure that goods can be sold anywhere in Europe, opening a larger market for the producers. Here, I won't defend the EU, some of those regulations are too much.They could do without some of those.
"This is kind of a dead giveaway that the EU isn't about free trade but rather its opposite." What about all those trade agreements that the US sign and which requires quidproquo? Are those a dead giveaway that the US are not about free trade but rather it's opposite?
"the unfairness of production quotas" quotas were imposed on Agricultural products because the EU was paying for those. You can't blame your customer for telling you that he will only order that much. Milk production have been removed to the relief of irish farmers who for years have complained that the EU was preventing them frommaking as much money as they should. I leave it to you to have a look at milk prices. They are now below production costs. Those Irish farmers are now asking for an aid package from the EU.

Taylor Conant said...


You ask, What about all those trade agreements that the US sign and which requires quidproquo? Are those a dead giveaway that the US are not about free trade but rather it's opposite?

My answer is, YES!

All governments obstruct free trade. That is what they are designed to do. You do not accomplish with a government anything but what would not happen if people were left to voluntary exchange.

And anti-trust is not a free market or free trade phenomenon. Back to the books for you, you have a bit of studying to do!

High Plateau Drifter said...

"All governments obstruct free trade."

I must confess that I had no idea what the EU was actually doing until Brexit came along. I had no idea that Angela Merkel has transformed Europe into the rigidly managed economy she grew up with in East Germany where quotas for production are issued by the state and all economic activity is regulated. The EU is communism without the arbitrary arrests and executions. No wonder the EU is becoming an economic basket case with unemployment among the 20 somethings ranging from 20 to 30%.

How the hell is monetary ease and ZIRP supposed to simulate a tightly restricted and regulated economy?

CP said...

The "dissonant voice" comment got automatically flagged as spam.

CP said...


Amusing - "overproduction" - that's a 1930s word that you don't hear much anymore.

Also funny that the European Commission has to maintain an official A-Z list of "misunderstandings"!

Taylor Conant said...

Anonymous misinterprets the truth to fit his narrative. Which is the lesser evil?

"No you conspiracy theorist, we only meddle in certain aspects of apple production, and you've gotten some of the details quite wrong"

Anonymous said...

About British apple producers, without EU subsidies, they would have been wiped out of the face of the earth.nobody is surprised that Spaniards and Italians have lower production cost. Here the absurdity is that they were paid despite the fact that they were not producing.
About antitrust and free markets, it's open to discussion. Rothbard always tread a very fine line. I have difficulty to reconcile the call for anarchy and the existence of property rights. Without those axioms, all the argument falls apart. On this topic, we are in the philosophical realm and I don't consider there is an absolute truth. Rothbard is always a bit too fuzzy for my taste "Since business always tends to adopt those practices and that scale of activity which maximize profits and income and serve the consumers best," do they really maximize all three? In my opinion, they maximize only profits.
Depending on your utility function, different forms of society can appeal to you. But it is difficult to impose your utility function to others.

CP said...

I think this speaks for itself:

Q - Fruit and vegetables that are not covered by a specific marketing standard (hereafter "SMS") shall conform to the general marketing standards (hereafter "GMS"). Are bananas covered by the GMS?

R - Bananas do not belong to Part IX of Annex I of Regulation (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products ("single CMO Regulation") nor are they covered by Regulations (EC) No 2200/96 and 2201/96. Therefore they are not covered by the GMS. In addition, bananas have their own SMS (Regulation (EC) No 2257/94 of 16 September 1994 laying down quality standards for bananas (OJ L 245, 20.9.1994).


Just Curious said...

Anonymous, I'm just curious, what brings you to Credit Bubble Stocks? Not that you are not welcome but your warm and fuzzy feelings about the EU would probably be welcomed in the comments on a Paul Krugman post. What are you getting out of this?

ADL said...

Just to toss my hat into the ring:

"Me and my grocer are not signatories to any free trade agreements and that's precisely why it's easy for us to do business with one another."

Of course, what makes it REALLY easy to do business is to have a common currency, the value of which both you and your grocer agree upon (I can hear the chorus of objections tuning up!), a system which ensures some sort of fallout if the apples he sells you are poisoned or if you steal his apples...

Good treaties and good regulation (and I'm not saying that's what they have in the EU--or indeeed the US!)(and I suspect I've lost everyone by saying there's such a thing as a godo regulation!) create the illusion of frictionlessness. But that illusion can then work against these treaties and regulations, as people don't realize the ways they benefit from them.

Curious and Curiouser said...

I think the same question applies to ADL. Does ADL have any views that wouldn't find a warm welcome as a New York Times editorial?

ADL said...


Just out of curiosity, if the purpose of that question is not to make me feel unwelcome, what is it?

I come here because sometimes people say smart things here, and sometimes those smart things are things with which I disagree. So sometimes I change my mind and sometimes I work a bit harder to justify my position, and sometimes when I haven't made up my mind about something I come a bit closer to making up my mind. I like to engage in discussion. I also like to critique ideas if they seem wrongheaded and if those who espouse them seem like they might be open to discussion.

Taylor Conant said...

We're yanking Anonymous's "Serious Conversation Membership Card" for egregious violations against logic and intent to commit trolling with his utterly stupid and weaselish decision to claim there are no absolute truths while engaging in a debate that centers on fundamental principles which are absolute truths for the debate to have any meaning and merit. So, you're done, Anonymous, you get no more replies beyond disdain as you are a logical outlaw.

As for ADL,

You probably should keep your hat out of the ring and in your mouth. What you've done is complicate something simple, completely needlessly. Remember what I said about "It's not quite Occam's Razor, but it's close"? You don't explain the origins of two party, voluntary exchange by introducing a third party with a monopoly on violence that dictates which currency or money they're going to trade against. That is complicating things needlessly. It's also putting the cart before the horse, the chicken before the egg, etc.

Me and my grocer don't need the EU, the federal government or any other coercive institution to provide us a common currency to exchange with. We can figure one out on our own.

We also don't need to set up a government to settle disputes about trade, fraud, theft, murder, rapine, etc. Human communities have recognized those coercive acts as undesirable before governments and legislatures and they'll recognize them as undesirable after governments and legislatures have been thrown on the ash heap of history. Only feeble-minded totalitarians fantasize that people stand around in rags and mudhuts waiting for enlightened governments to teach them how to trade good and work good and be good.

You may think your intent is to have a serious conversation but when you choose to "throw your hat in the ring" on the premise that your opponent is too misguided to realize he's throwing the law and order baby out with the government bath water, you have another thing coming. You've got more schoolin' to do before you run your insolent yap trap around here and treat your opponents like they're stupid as a debate tactic. Go read the same book Anonymous should be wrist deep in right now and then get back to us if you come up with something interesting to add. Take the trolling elsewhere.

League of Women Voters said...

But, who will build the roads??

Taylor Conant said...

But who will dictate which common currency we use to make regulatory bureaucracy approved trades?

But who will dictate the value of that currency at the time it is first created when, prior to its coming into existence, it had no market value and no historical trades to reference?

But who will capture the rents generated by those initial bond trades in the new common currency that are offered to select good guy financial institutions as a freebie in return for making a market in a previously valueless common currency?

But who will shill for this fraudulent enterprise by overlooking the great evil it entails and instead focus in on minor lifeboat scenario imperfections that might exist in a free market in its absence?

CP said...

This is one of our most commented on posts ever.

For some reason, over the past 9 years CBS never became the type of blog where people have big discussion threads. Probably because I don't post often enough.

[Although, here is one example of a long, fruitful comment thread: http://www.creditbubblestocks.com/2015/08/big-drop-in-conrad-industries-income.html]

Anyway, we have never censored and only delete spam comments from China, etc.

Certainly some commenters add more value than others. But each can decide that for himself.

Taylor Conant said...


Good point. In the case of a person like ADL, they might find more success in coaxing thoughtful debate and discussion from those they agree or disagree with if they came at it like Benjamin Franklin might, ie, "Have you considered X?" or "I think it is Y, what do you think of that?"

Notice his passive aggressive approach-- to claim the high ground of having an "open mind" ready to consider other opinions, but to take the low ground of making simplistic arguments which imply his opponent hasn't considered a very obviously bad potential outcome of their position, and then to add in parenthetical remarks to the effect of "Don't even bother making a counter-argument, I already know what you're going to say and it's just as stupid as your current argument wherein you clamor for an ideal principle while overlooking the practical consequence of abandoning your personal security."

Smug much?

I'm willing to try again if he'll tune down the trolling. Otherwise he gets his "Serious Conversation Membership Card" revoked like Anonymous, at least as far as I am concerned. (And, to "Curiouser's" point, it's incredibly tone deaf, bare minimum, to come into a forum you know from observation to be sympathetic to a particular view and to not only say something provocative given those views, but to say it in a beguilingly condescending fashion all while passive aggressively you're "just doin' a little open minded consideration amongst smart fellow such as yerselves"... it whiffs strongly of troll, a la "Don't mind me, I am just driving by your house and firing a machine gun through the window.")

CP said...

Also, in regard to Brexit and the EU, etc - we all know that the monetary union is going to go away.

Germans like sound money and the lower-latitude PIGS need to print, print, print.

I seriously question whether Euros will make it a mere 20 years (to Jan 2022)!

The good news is that when the Euro goes away, the currency that will likely be formed by the Holy Roman Empire territories will be strong.

It would be an excellent replacement for USD.

ADL said...

I have enjoyed much from CP over the years and am always pleased by moments of congruence in our thinking (yes, the monetary union is probably toast--and it's not Brexit wot did it).

I think my tone has been mischaracterized, but hey: I have far from perfect self knowledge, so who knows?

Anyway, it's a bit late. I'm going to fry up dinner, more insolent yap trappery possibly TK.

James said...

I don't understand why ADL's comment is so controversial. He's just describing the basic functions of government--a stable currency, fair and transparent markets, etc. Regulations aren't unique to overreaching bureaucracies; there were, e.g., many laws in medieval England regulating trade and commerce.

James said...

I'm not sure what Brexit would accomplish. Right now, Britain has to live with a heavy-handed EU bureaucracy and it gets flooded with immigrants from Eastern Europe and numerous third-world countries. If it leaves the EU, the Eastern Europeans will stop coming but the third-worlders will continue to flood in and the EU bureaucrats will just be replaced by homegrown parasites. The political class in England is just as awful as the political class in Europe, if not worse, so I'm not sure how Brexit would be an improvement?

Taylor Conant said...


Would you be willing to offer a logical argument for your assertion about the basic functions of government? If you would, I'd be willing to engage it with a counter argument. Otherwise I'm not sure what option there is to respond other than "I agree", which I don't, or "no, it's just the opposite" which also isn't an argument but rather a contradictory assertion.

Taylor Conant said...


Re: Brexit, try looking at it like this-- if the EU represents some kind of political problem for the UK (burdensome regulations, immigration policies, etc), would it, all else being equal, be better to remain or better to leave?

This question is ceteris paribus. It is attempting to isolate and explore the consequences of one causal relationship at a time. So ignore all the other problems the UK might have. What makes remain a better position than leave on the merits of the EU alone?

High Plateau Drifter said...

OK! I will ask it again!!

How the hell is monetary ease and ZIRP supposed to simulate a tightly restricted and regulated economy?

What does Super Mario think he is going to accomplish??

Oh! Wow!! Short term rates when negative!! I think I am going to start a new business!! Might take a year or so but I'm gonna read all those EU regulations first to make sure my idea is not illegal or allocated to Poland!

James said...

What makes remain a better position than leave on the merits of the EU alone?

Being part of the EU improves the quality of the immigrants Britain receives. Right now, Britain gets lots of economic migrants from Eastern Europe who work hard and contribute to the economy. If it left the EU, the bulk of its immigrants would come from godforsaken Commonwealth countries like Pakistan, Bangladesh, and Nigeria, and they would be statistically far more likely to commit crimes and go on the dole.

Anonymous said...

Bananas are another euo myth. Regulations says that bananas are class 1, class2 or extra class but you can sell any shape of banana. EU will just determine the labelling. It might sound, and probably is, overkill but you can grow any banana you like.
On Central banks, I share the view that the Fed, the BOJ and the ECB are doing it wrong. Capitalism is about failure and creative destruction but we live in a world which can't tolerate short term pain. Therefore people are not ready to trade short term pain (which might be acute) for long term gain.
On absolute truths, Rothbard himself qualifies his statement with phrases like "I believe". He comes up with anecdotal (i don't want to dismiss it, just want to underline the empirical appraoch surprising for somebody who builds a system) evidence to back up his claims. But he recognizes that to assume that the generalisation will work requires a leap of faith. Besides,I am of the view that as soon as you recognize property rights, you introduce conventions (negation of anarchy). And it is the first step towards the creation of a state.

Anonymous said...

Actually, we are drifting (how ironic) from the initial argument.
If I had to sum up mine
-the EU is additional complexity and another layer of state. That's enough reason for it to be rejected. Agreed
-the EU is less democratic and more complex than existing european states. Disagreed
-EU regulations are can be stupid. Agreed (just need to know at regulation saying how olive oil should be served in restaurant) but examples chosen were the wrong ones
- Eu was an obstacle to free markets in Europe. Quite the contrary

Antitrust and free markets, Euros, negative rates were not issues initially discussed by HPD.

Taylor Conant said...


The UK's immigration policy with regards to individuals originating in non-EU countries is NOT a facet of the EU and is not relevant to the question of whether the UK should leave or remain. That is an entirely separate issue and by introducing the consequences of this policy into the examination of the Brexit question you're confusing the issue. This is precisely what I warned against.

Asking my question again, "What makes remain a better position than leave on the merits of the EU alone?" the only relevant part of your reply would be, "Britain gets lots of economic migrants from Eastern Europe who work hard and contribute to the economy."

If this is truly a beneficial policy for the UK, there is no reason why they couldn't adopt this stance toward immigrants originating in Eastern Europe even without being part of the EU. After all, immigration policy is something the "host" country determines, ie, who will they let in and who will they keep out? The UK doesn't have to be part of the EU to let in people from Eastern Europe.

Vlad said...

Supposedly, if the British voted for exit, the government would immediately invoke article 50 – would give notice that Britain was resigning from the EU. That is what the prime Minister told them.

Well, the British voted for exit, and surprise, surprise, the government is not invoking article 50. The prime minister lied.

What a surprise. Are you surprised?


Anonymous said...

Are the low T white Brits going to make the UK the first Muslim country with a nuclear arsenal? Or do the Tridents and warheads, which are furnished by the US Navy, get quietly taken away à la South Africa at that point?

Taylor Conant said...

Don't Pakistan and India have nukes?


India is not a "Muslim country" although it has many, many Muslims. Pakistan does seem like a Muslim country.

The Wiki article also claims Turkey has been given the right to "share and store" nuclear weapons-- also a Muslim country.

CP said...

Speaking at the end of a summit in Brussels where EU leaders started trying to pick through the wreckage after David Cameron’s referendum defeat, Mr Hollande warned that it would be unacceptable for clearing — a crucial stage in trading of derivatives and equities — to take place in the UK.

“The City, which thanks to the EU was able to handle clearing operations for the eurozone, will not be able to do them,” he said. “It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson.”

Here is the FT story. Note that London’s financial elites don’t need such a warning, whereas to the general citizenry it confirms the portrait of the EU as an anti-British regulatory tyrant.


Anonymous said...

It was linked earlier that Trump and Clinton discussed a Trump candidacy over the phone last year, and apparently Clinton was encouraging.

My guess is that it is Clinton who was playing the long, or at least the medium con, like he always does, and Trump was playing a short con.

The Clinton con was that Trump gets into the race, makes the serious Republican candidates look bad, and the Republican party look bad. He might bolt from the Republican party and run as an independent like Perot, and we know how much the Perot run helped Clinton! He could make criticisms of the serious Republican candidates that Hillary Clinton can’t make, like Perot did. And if for some reason Trump won, well he should be easy to beat in the general election in November.

This would be a typical Clinton con, thought out and slick, with the problem is that people might actually turn out to like what Trump is saying, something that would never occur to Clinton.


CP said...

We've almost managed to surpass the length of this comment thread on the energy stocks post:


Maybe someone will push it over the top...

CP said...

BTW, the previous comment:

The Clinton con was that Trump gets into the race, makes the serious Republican candidates look bad, and the Republican party look bad. He might bolt from the Republican party and run as an independent like Perot, and we know how much the Perot run helped Clinton! He could make criticisms of the serious Republican candidates that Hillary Clinton can’t make, like Perot did. And if for some reason Trump won, well he should be easy to beat in the general election in November.

This would be a typical Clinton con, thought out and slick, with the problem is that people might actually turn out to like what Trump is saying, something that would never occur to Clinton.


CP said...

Anybody want to revisit this classic thread?