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Hat tip to ConservativeHome who highlight an Ipsos MORI poll that shows Lib Dems, leaderless, up two points from our nadir at 13%. Which begs the question; perhaps we should fill the vacancy until and unless it starts to fall again...:)

Labour 1% ahead in MORI poll tomorrow:

Over at the Latin lovers collective David has been trying to fathom why anyone would call Milton Friedman a "liberal". I responded with a long comment that really deserves to be a post of its own on my blog...

See, I actually think Milt is much misunderstood and misrepresented. Just like Smithy. I've seen him make the "claim" that a company's only duty is to create profit for its shareholders. And there's a but. He is talking about the sole legal obligation, indeed the founding rationale, of the law that created incorporated companies in the US.

When incorporation was first enshrined in US law it was in response to the sort of abuses that marked out things like the South-Sea Bubble in the UK. Investors would be conned into parting with their money and then the merchant adventurer would go off and do what he pleased with their money. The same happened in the early US and so they created a legal framework that was solely intended to protect the stockholder from the conmen that sought to part them from their money - business could not get investors without that certainty that if they clubbed together to form a corporation their interests would be legally protected.

His line is actually a philosophical one that a corporation has no moral conscience, that it's not really a "person" - I get the impression he doesn't like the later case law in the late c19th US that made a corporation into a legal person. But, he says, those people who go to make up a corporation, employees, managers and most importantly stockholders do have moral consciences and crucially that it's the process of making money that allows them to exercise that moral conscience for good.

I don't think that's a bad way to look at it actually. We occasionally, in the Oxfordshire Social Enterprise Forum, have to define "social enterprise', and lots of people say such is a "not for profit company". But a preferred phrase amongst social enterprise "practitioners" is that it is a "more than profit company". Profit has become in some circles a dirty word. But Friedman's line, and that of social entrepreneurs, is that it's what you do with that profit that could be dirty or could be good. In Friedman's case, in US law, the point is that it is simply not up to the corporation itself to decide for the stockholders what to do with that profit, for good or bad. Every corrporate entity, in order to justify the trust that investors and members put into it, must make a profit to be able to carry on trading, but what those "real people" involved decide to do with their profit is what counts.

For me though, it was "Free to Choose" that made me think differently of Milt. To me before then he was the academic heavyweight that gave justification to some of the worst aspects of Thathcerism. But then I read him describe how people could take control for themselves. His example was education. He suggested, for example, that something as precious as the education of our children should not be left to the state, and advocated parents and teachers getting together and forming PTA co-operative schools to put them in control locally.

And this is Adam Smith's line as well in my opinion. He said that the state should get involved, amongst other things, when something needed doing that was too big for a person or small group of associated people to arrange for themselves. And I would say that the whole story of the twnetieth century welfare state has been usurping the right, and ability, of groups of people to get on and arrange such things for themselves or amngst themselves. As John Howson reminded us when we had that consultation on the public services policy paper in the Town Hall in Oxford, state schools are legally merely the "default" option. The obligation legally is on parents to ensure their children are educated, and they are allowed to go private, to home-school, whatever, but that the state provides a fall-back. But the way state education has developed in this country at least we have had our minds numbed to the idea that there are other options. That is what one could describe as enslavement by conformity.

I believe there are other areas where Milton Friedman has been done a disservice by his connection with Reaganomics and Thatcherism. He does change his mind. But those who took his ideas and made them their political ideology don't like to hear that. Monetarism is a case in point. Friedman has had a long standing philosophical problem with fiat money. I think he's really a "hard money" advocate - one who believes that stable money means something still backed with a relatively fixed amount of some precious specie such as gold. His adaptation of this to the inflationary pressures and policies of the seventies was to advocate tight control of fiat money which became the mantra of the political monetarists - they even made a song out of it to educate the great British unwashed in the late seventies - "We'll count our blessings if we apply/Tight control to our money supply". But since then Friedman has said that if he were to go through it all again he probably would not have placed such a heavy emphasis on control of money supply.

I pledge that, if stopped and questioned for no reason by an officer of the law without having invited him or her into a conversation with me, I will make it my business to make the whole business as long-winded and bogged down in paperwork and police time as possible.

There's been much talk, most of it at least tacitly approving, of the restrictions or bans imposed in the past few days on so called "short selling" company shares. Most of you probably don't know that my first career, straight out of school., was as a trader on the stock exchange, followed by stints in several stock-broker firms mostly in private client advice and fund management, before I got into IT - which was as a result of my city experience. That's all a bit apropos of nothing really. After all, you'd be right in thinking that if I had been successful in this first career I might now be funding a think tank or something. But it gives a little background to my knowledge of this issue.

Short sellers, per se, are not the problem here it seems to me. Indeed the stock exchange relies on players prepared to go short - that's what market makers are effectively obliged to be prepared to do when they make a price.

Short selling is also an important way of the market getting the information it needs to make accurate value assessments. Longer term shareholders may have more emotional reasons than pure profit to resist pressure. Even perhaps just inertia. Sometimes even tax considerations. Short selling is also a way in which holders of stock can increase their returns on the stock by renting it to the short sellers. Little risk to them.

In my day, you could short sell, effectively, for fourteen working days. The London Stock Exchange used to work on a fortnightly settlement cycle. So for example a deal you do tomorrow, if tomorrow was a new cycle, would not need to be settled until the Monday in the middle of the next fortnightly cycle. If you went short tomorrow, you could, potentially, buy back for cash settlement (a special, premium service for urgent trades that was settled the next trading day) as late as the Thursday night before settlement day - so giving you fourteen trading days to see the stock fall and buy it back.

Nowadays everything is more or less "cash settlement" with positions settled the next working day - hence the self limiting requirement to borrow stock to deliver on short positions.

No, there's nothing wrong with short selling. Once you realize that the secondary market is stocks and shares is a big gambling den in any case, how can you outlaw one type of gambler and not another.

The real problem, it seems to me, with the run on HBOS shares for example, blamed on "short sellers", is the idea that some market players, hedge funds were cited, were "hunting in packs". Now, it is conceivable that even if there's nothing wrong with the fundamental financial health of a company, such a "pack" could be strong enough to provoke a run on a stock simply by weight of numbers. This, however, would be market manipulation. It would be legal, ethical, and even just plain sensible, to suspend trading in a particular share, or even in the whole market, if there was such illegal manipulation going on, or suspected. If a suspension was unwarranted, there should still be the equivalent of a "stewards inquiry" to determine if there was manipulation, a cartel operating, and if so how to punish them.

If the fundamentals were bad for HBOS, and actually I suspect that they were worse than the financial watchdogs have been saying - otherwise opening their books would have been enough to disprove the rumours - then the short sellers simply administered the coup de grace a bit more humanely perhaps than dragging it out for weeks more uncertainty.

I very much suspect that some hedge funds and private equity fund managers do aggressively hunt in packs occasionally. The fact that the secondary market is a gambling den makes it likely. That needs investigating. Market procedures for suspending trading in a market in which the true value of a company has become impossible to assess immediately need looking at. But having a go at the short sellers, who could, after all, just be the people maintaining liquidity in a particular market, is simply creating a scape-goat. The authorities should be ashamed.