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08 June 2012


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John Goose

Terry, I enjoy listening to you and invest with you but to even hit at a suggestion that the laws of physics can be compared with the shambles that is economics is a step too far!

Alan Butterworth

Contrary to your view I found Allister Heath's article to be garbled. He has presumably read the works of Hayek and decided that they hold the answer; any other view is bad and wrong. He seems to conflate the idea of a centrally-planned economy, which most people would agree does not work, with economic policy in general. Surely you have to have some economic policies in a modern state - the question is: which ones? The trouble with economics as I see it is that there is no such thing as "the laws of economics". Economists hold widely differing views. Unlike Physics you cannot do controlled experiments to prove or disprove a theory; there are too many variables. A better analogy might be with medecine - a drug may have different effects on different patients and at different times. There are side effects which may be minor or serious. Both intended effects and side effect may accumulate over time and the final effect may be a cure, death or something in between. Often the patient is taking other drugs which may interact in unknown ways.

Of course countries are run by elites and cliques with a strong tendency to arrogance. That is the nature of politicians. In my view anyone who wants to be a politician should thereby be disqualified from office. Only someone with a degree of humility should be allowed access to any kind of power.

I could go on, but I will restrain myself at this point.

Guy Fawkes

I came across this the other day and it made me both chuckle, and think.

If you start with a cage containing five monkeys and inside the cage, hang a banana on a string from the top and then you place a set of stairs under the banana, before long a monkey will go to the stairs and climb toward the banana.

As soon as he touches the stairs, you spray all the other monkeys with cold water.

After a while another monkey makes an attempt with same result ... all the other monkeys are sprayed with cold water. Pretty soon when another monkey tries to climb the stairs, the other monkeys will try to prevent it.

Now, put the cold water away.

Remove one monkey from the cage and replace it with a new one.

The new monkey sees the banana and attempts to climb the stairs.To his shock, all of the other monkeys beat the crap out of him. After another attempt and attack, he knows that if he tries to climb the stairs he will be assaulted.

Next, remove another of the original five monkeys, replacing it with a new one.

The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment...... with enthusiasm, because he is now part of the "team".

Then, replace a third original monkey with a new one, followed by the fourth, then the fifth. Every time the newest monkey takes to the stairs he is attacked.

Now, the monkeys that are beating him up have no idea why they were not permitted to climb the stairs. Neither do they know why they are participating in the beating of the newest monkey.

Finally, having replaced all of the original monkeys, none of the remaining monkeys will have ever been sprayed with cold water. Nevertheless, not one of the monkeys will try to climb the stairway for the banana.

Why, you ask? Because in their minds...that is the way it has always been!

This, my friends, is how politics operates... and this is why, from time to time:

ALL of the monkeys need to be REPLACED AT THE SAME TIME.

John Jolley

Hi Terry,
Love your comments but what are your thoughts on keeping some gold as an investment ?


Dear Terry

A little humility would make these rants a lot more interesting. Sure, you may be right, but an unwillingness to even conceive that you might not be does your intelligence and your readers a disservice.

All the best for the blog...

Geoffrey Ashby FCA

AQnd the EU itself is another ill conceived shambles - how on earth can Cameron and crowd continue tipping in over £9bn a year more than we get back - and we are bankrupt; worse, we have our old folf being penalised including perhaps loss of Travel Cards when all we need do is stand up for ourselves and cut back the UK contribution, including refusing to go along with Brussels 2.5% increase in the Budget.
I get sick and tired of listening to cries for more 'growth', Plan B etc when it should be obvious we and most of Europe aqre feeling the results of 'Free Trade' and lack of protective Tarrifs and Quotas - it was recognised in recent times for Italy - remember the Chinese container ships stranded off their coast?
It has been our Companies who have picked up their Factories and taken them abroad - and the jobs. Of course, we now need China to recapitalise Europe so now is not the time to disagree about 'Free Trade@!
The truth is that there is no workable Plan 'B' - but we might acheive something by instead of printing money and driving Gilts ever higher, we could force our Banks to let the Bof E take up Preference Shares to give a Capital Base able to absorb the losses to come from the Euro fallout and also enable property foreclosures, material drop in property values and therefore a pick up in new Housing as people are then able to afford the (40 - %0%) lower prices.


"Surely in any other area of human endeavour someone confronted with the evidence of the damage wrought by the policies they had supported, as we are daily with the Eurozone disaster/farce, would have the good grace and common-sense to remain silent. But they have no such sensibilities"

It is not only the lack of sensibilities which prevent 'the clique' from acknowledging the wrong and damage wrought by their selfish and ideological agendas but as we can witness when any one of them opens their mouth, sheer undiluted arrogance!

David Hutchison

The true euro believer is not influenced by contrary evidence anymore than many are not influenced by space exploration or fossils.
I seem to remember that Howard Davies had something to do with the FSA shambles, but can't quite remember what it was.
In his article in today's Times, the Spanish writer Carlos Ruiz Zafon, said that the euro was "designed either by simpletons or very clever mousetrap builders."
Mousetrap is an interesting analogy. Many little mice in Spain and Greece etc., have certainly been caught in this trap - a trap pushed by schemers(not simpletons) such as Mitterand, Khol and Delors etc.,and built to order by bureaucrats. Then there are all the hangers on in Brussels (many ex politicans such as Kinnock) who have done v well out of this
particular mousetrap and still of course back it's use.
Those who still suggest that we in Britain should nibble at this particular cheese, would have landed themselves in the Tower in a less forgiving age.

Terry Smith

Jestyn; I see it this way: I stood for the Referendum Party in the 1997 election to stop the UK entering the Euro. At the time there was a wall of sound from those who wanted us to join. If we had, where would we be now? I have been warning since the start of this crisis that it would come to rival the Long Depression. This was at a time when the then Prime Minister thought it was a normal recession which would be over in six months. In a December 2008 article in the Sunday Telegraph I wrote ‘I think that the downturn will be much more prolonged than usual. The average for the USA for 1854-2001 was 17 months, but the Great Depression of 1929-33 lasted 43 months and the granddaddy of recessions in this period was one which lasted 65 months from 1873-79. It would be wise to prepare for a long siege’ http://www.terrysmithblog.com/straight-talking/2008/12/2008-a-year-to-forget-but-one-we-wont-be-allowed-to-for-a-long-long-time-.html In the same article I wrote ‘This is why the next battle will be over the creditworthiness of governments and the strength of currencies’. I also called for the separation of retail and investment banking in a Daily Telegraph article in September 2008 http://www.terrysmithblog.com/straight-talking/2008/09/index.html. So with this track record, I hope you will excuse the lack of humility. It’s not a case of I may be right. I am right, and not by using hindsight. Thank you.

Terry Smith

David Hutchison: Yes, good article by Carlos Ruiz Zafon. I also like it that he dislikes the word “elite” for those who control Spain and the EU (and I would add the UK and the USA). The word implies that they are in some way better than those they control when they are self evidently worse. That’s why I prefer to sue the term “clique”

Geoffrey Ashby FCA: I agree with you. I am due to publish something next week on where the cuts in spending should fall and funnily enough our EU budget contribution may get a mention.

John Jolley: I have gold and I don’t believe there is any substitute for holding the physical metal.

Guy Fawkes: Nice analogy. The rotational replacement of “leaders” (another inappropriate term) is not having any effect.

Alan Butterworth: I thought the main thrust of Heath’s article was his contrasting of the views of Hayek with those of Krugman. For what it’s worth the Hayekcentre.org seems to approve of his article and my blog on it as they tweeted their 5,000 followers about it –see @FriedrichHayek. I think he’s right that governments cannot produce growth. One f the many disturbing features of the current environment is the belief that they can and the dangerous distortions that pursing this belief is causing. Anyway, as the government is 50% of GDP in the UK, I would suggest that we have a significant element of a planned economy, albeit not well planned. You make a good point about medical science v physics. I can’t remember who but someone said that a desire to become Prime Minister should be an automatic disqualification form holding the office.

Grumpy Oldman

Terry you say: "and regulation, summits and new acronyms (EFSF, ESM, LTRO) for flooding the world with more of the currencies they are attempting to devalue"
Hear hear!! But you have not commented on Mervyn moneyprinter. He should lose his knighthood, in my opinion. Or will we wait till inflation is 25%??

Terry Smith

Grumpy Oldman: You have a point. As you know, my prime candidate for being stripped of a knighthood is “Sir” Alan Greenspan who in my view did more than any other single person to cause this crisis and was knighted ‘for his contribution to global economic stability’ (sic) but clearly we do not have any central bankers at the moment in the mould of Paul Volcker, which is what we need.

Grumpy Oldman

Terry, thank you for that.
In further 'world gone mad' evidence:
I was recently flicking through Investors Chronicle. 47 yr old chap was seeking advice on his portfolio for retirement. It looked (to me) pretty sound-similar type of profile to Fundsmith companies.
One of the advisors said he was saving TOO MUCH!!

Grumpy Oldman

To add to previous post: It was May 3rd edition of IC and it was Chris Dillow of IC who said the chap was maybe saving too much.

Grumpy Oldman

Sorry, me again.
Link for previous revelation:


Terry Smith

Sorry I am behind on responses but I am on the London to Paris bike event.

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