The last time we heard a UK inflation figure, it was 2.8% per year. Today it has been announced that August inflation “fell” to 2.7%. However, the Consumer Price Index has INCREASED from 125.8 (July) to 126.4 (August). That is an increase of 0.6 in ONE MONTH, which when annualised, gives a price inflation figure of 5.7% per year! This is a situation which we’ve been amused by for quite a long time now: Inflation falling while prices increase. The magic of numbers! Here is the latest ONS bulletin. The numbers are on page 4: http://www.ons.gov.uk/ons/dcp171778_323760.pdf
A single swallow doesn’t make a summer! Now is the time to calm down and inject a bit of realism into the equation!
(Reuters) – British industrial output was flat in July and there was a marked deterioration in the trade balance, official data showed on Friday, taking some of the shine off recent strong economic data.
Output in the industrial sector – which makes up about one sixth of Britain’s economy – had been expected to edge up by 0.1 percent according to a Reuters poll.
The narrower category of manufacturing rose by 0.2 percent, just short of forecasts for a 0.3 percent rise, although June’s figure was revised up, the Office for National Statistics said.
The Bank of England pledged last month to keep interest rates on hold until unemployment falls to 7 percent, something it does not envisage happening for another three years, but the strength of recent data has encouraged traders to bet rates might rise as soon as next year.
Separate figures showed Britain’s goods trade deficit widened to 9.85 billion pounds in July after narrowing sharply in June. Economists had forecast a gap of 8.153 billion pounds.
Including services, in which Britain traditionally runs a surplus, the trade deficit widened to 3.085 billion pounds. That was more than double its level in June and the worst reading since October 2012.
Exports to non-European Union countries plunged by nearly 16 percent, the biggest monthly fall since January 2009.
Monthly trade figures are volatile but July’s figures may dampen hopes that Britain’s economic recovery is broadening and moving onto a more sustainable footing.
(Reporting by Christina Fincher and William Schomberg)
#SYRIA: Does the increasingly isolated Obama, with his barking-mad, cigar-chomping generals, not realise that an attack on Syria will cause markets to tumble, wipe BILLIONS off share prices, accelerate the failure of the “propped-up-by-the Fed” American economy, damage the BRICS countries’ economies, raise oil prices, accelerate the collapse of the Eurozone and probably cause the deaths of thousands more innocent people? There are times when principle has to give way to pragmatism. #Callmehysterical!
SYRIA: The Pope, spotting an obvious bandwagon, has urged world leaders to “lay aside the futile pursuit of a military solution”. He has also invited 1.2 billion Roman Catholics and people of other faiths to join him in a day of prayer and fasting on Saturday “to end the civil war”. He obviously does not realise that to the millions of displaced victims of Syria’s violence, prayer and (especially) fasting, come quite naturally!
What you see in the mirror is never what other people see. Let’s hope that there’s a massive reality check before the s*** hits the fan.
Official figures have revealed that MPs, peers and staff at the Houses of Parliament have tried to access ‘adult’ websites using their work computers 309,316 times over the past year. About 850 attempts to click on pornographic websites were blocked each day. A popular site was “Out of Town Affairs”, a dating site for those wanting to engage in extra-marital affairs. Note a new proposed Westminster logo. It has a vaguely nautical theme. Mind you…with those numbers, they must be swimming in it!! 🙂
The Reports are telling us. The Statistics look good. The graphs appear to have turned a corner. Today’s good news is that August’s UK construction PMI has hit its highest level since September 2007! ALL fantastic news! However, we all look forward to the day when the population-at-large is given the means to participate in the Coalition’s “New Atlantis” because, in spite of the statistics and flim-flam, too many Brits continue to struggle. The As and Bs “have it”! Great Britain is now a proper two-nation state.
President Obama has spent many days now consulting with Congress and talking with leaders around the world about the situation in #Syria. And last night the president asked all of us on his national security team to consult with the leaders of Congress as well, including the leadership of the congressional national security committees. And he asked us to consult about what we know regarding the horrific chemical weapons attack in the Damascus suburbs last week.
I will tell you that as someone who spent nearly three decades in the United States Congress, I know that that consultation is the right way for a president to approach a decision of when and how and if to use military force. And it’s important to ask the tough questions and get the tough answers before taking action, not just afterwards.
And I believe, as President Obama does, that it is also important to discuss this directly with the American people. That’s our responsibility: to talk with the citizens who have entrusted all of us in the administration and the Congress with responsibility for their security.
Our intelligence community has carefully reviewed and rereviewed information regarding this attack. And I will tell you it has done so more than mindful of the Iraq experience. We will not repeat that moment. Accordingly, we have taken unprecedented steps to declassify and make facts available to people, who can judge for themselves.
But still, in order to protect sources and methods, some of what we know will only be released to members of Congress, the representatives of the American people.
That means that some things we do know, we can’t talk about publicly.
So, what do we really know that we can talk about? Well, we know that the Assad regime has the largest chemical weapons program in the entire Middle East. We know that the regime has used those weapons multiple times this year, and has used them on a smaller scale but still it has used them against its own people, including not very far from where last Wednesday’s attack happened.
We know that the regime was specifically determined to rid the Damascus suburbs of the opposition, and it was frustrated that it hadn’t succeeded in doing so. We know that for three days before the attack the Syrian regime’s chemical weapons personnel were on the ground, in the area, making preparations. And we know that the Syrian regime elements were told to prepare for the attack by putting on gas masks and taking precautions associated with chemical weapons. We know that these were specific instructions.
We know where the rockets were launched from, and at what time. We know where they landed, and when. We know rockets came only from regime-controlled areas, and went only to opposition-controlled or contested neighborhoods.
And we know, as does the world, that just 90 minutes later all hell broke loose in the social media. With our own eyes we have seen the thousands of reports from 11 separate sites in the Damascus suburbs. All of them show and report victims with breathing difficulties, people twitching, with spasms, coughing, rapid heartbeats, foaming at the mouth, unconsciousness and death.
And we know it was it was ordinary Syrian citizens who reported all of these horrors.
And just as important, we know what the doctors and the nurses who treated them didn’t report: not a scratch, not a shrapnel wound, not a cut, not a gunshot wound. We saw rows of dead lined up in burial shrouds, the white linen unstained by a single drop of blood.
Instead of being tucked safely in their beds at home, we saw rows of children lying side by side, sprawled on a hospital floor, all of them dead from Assad’s gas, and surrounded by parents and grandparents who had suffered the same fate.
The United States government now knows that at least 1,429 Syrians were killed in this attack, including at least 426 children. Even the first responders — the doctors, nurses and medics who tried to save them — they became victims themselves. We saw them gasping for air, terrified that their own lives were in danger.
This is the indiscriminate, inconceivable horror of chemical weapons. This is what Assad did to his own people.
We also know many disturbing details about the aftermath. We know that a senior regime official who knew about the attack confirmed that chemical weapons were used by the regime, reviewed the impact and actually was afraid that they would be discovered.
We know this.
And we know what they did next. I personally called the foreign minister of Syria, and I said to him, if, as you say, your nation has nothing to hide, then let the United Nations in immediately and give the inspectors the unfettered access so they have the opportunity to tell your story.
Instead, for four days they shelled the neighborhood in order to destroy evidence, bombarding block after block at a rate four times higher than they had over the previous 10 days. And when the U.N. inspectors finally gained access, that access, as we now know, was restricted and controlled.
In all of these things that I have listed, in all of these things that we know, all of that, the American intelligence community has high confidence, high confidence this is common sense, this is evidence, these are facts.
So the primary question is really no longer, what do we know. The question is what are we — we collectively — what are we in the world going to do about it.
As previous storms in history have gathered, when unspeakable crimes were within our power to stop them, we have been warned against the temptations of looking the other way. History if full of leaders who have warned against inaction, indifference and especially against silence when it mattered most.
Our choices then in history had great consequences, and our choice today has great consequences.
It matters that nearly a hundred years ago, in direct response to the utter horror and inhumanity of World War I that the civilized world agreed that chemical weapons should never be used again. That was the world’s resolve then. And that began nearly a century of effort to create a clear red line for the international community.
It matters today that we are working as an international community to rid the world of the worst weapons. That’s why we signed agreements like the START treaty, the New START treaty, the Chemical Weapons Convention, which more than 180 countries, including Iran, Iraq and Lebanon, have signed onto.
It matters to our security and the security of our allies. It matters to Israel. It matters to our close friends Jordan, Turkey and Lebanon, all of whom live just a stiff breeze away from Damascus. It matters to all of them where the Syrian chemical weapons are, and if unchecked, they can cause even greater death and destruction to those friends.
And it matters deeply to the credibility and the future interests of the United States of America and our allies. It matters because a lot of other countries whose policies challenge these international norms are watching. They are watching. They want to see whether the United States and our friends mean what we say. It is directly related to our credibility and whether countries still believe the United States when it says something. They are watching to see if Syria can get away with it because then maybe they too can put the world at greater risk.
And make no mistake. In an increasingly complicated world of sectarian and religious extremist violence, what we choose to do — or not do — matters in real ways to our own security. Some cite the risk of doing things. We need to ask what is the risk of doing nothing.
It matters because if we choose to live in a world where a thug and a murderer like Bashar al-Assad can gas thousands of his own people with impunity, even after the United States and our allies said no, and then the world does nothing about it, there will be no end to the test of our resolve and the dangers that will flow from those others who believe that they can do as they will.
This matters also beyond the limits of Syria’s borders. It is about whether Iran, which itself has been a victim of chemical weapons attacks, will now feel emboldened in the absence of action to obtain nuclear weapons. It is about Hezbollah, and North Korea, and every other terrorist group or dictator that might ever again contemplate the use of weapons of mass destruction. Will they remember that the Assad regime was stopped from those weapons’ current or future use, or will they remember that the world stood aside and created impunity?
So our concern is not just about some far-off land oceans away. That’s not what this is about. Our concern with the cause of the defenseless people of Syria is about choices that will directly affect our role in the world and our interests in the world.
It is also profoundly about who we are. We are the United States of America. We are the country that has tried, not always successfully, but always tried to honor a set of universal values around which we have organized our lives and our aspirations. This crime against conscience, this crime against humanity, this crime against the most fundamental principles of international community, against the norm of the international community, this matters to us, and it matters to who we are. And it matters to leadership and to our credibility in the world.
My friends, it matters here if nothing is done. It matters if the world speaks out in condemnation and then nothing happens.
America should feel confident and gratified that we are not alone in our condemnation and we are not alone in our will to do something about it and to act. The world is speaking out, and many friends stand ready to respond. the Arab League pledged, quote, “to hold the Syrian regime fully responsible for this crime.” The Organization for Islamic Cooperation condemned the regime and said we needed, quote, “to hold the Syrian government legally and morally accountable for this heinous crime.”
Turkey said there is no doubt that the regime is responsible. Our oldest ally, the French, said the regime, quote, “committed this vile action, and it is an outrage to use weapons that the community has banned for the last 90 years in all international conventions.”
The Australian prime minister said he didn’t want history to record that we were, quote, a party to turning such a blind eye.
So now that we know what we know, the question we must all be asking is what we will do. Let me emphasize President Obama, we in the United States, we believe in the United Nations. And we have great respect for the brave inspectors who endured regime gunfire and obstructions to their investigation. But as Ban Ki-moon, the secretary-general, has said again and again, the U.N. investigation will not affirm who used these chemical weapons. That is not the mandate of the U.N. investigation. They will only affirm whether such weapons were used. By the definition of their own mandate, the U.N. can’t tell us anything that we haven’t shared with you this afternoon or that we don’t already know. And because of the guaranteed Russian obstructionism of any action through the U.N. Security Council, the U.N. cannot galvanize the world to act, as it should.
So let me be clear: We will continue talking to the Congress, talking to our allies and, most importantly, talking to the American people. President Obama will ensure that the United States of America makes our own decisions on our own timelines based on our values and our interests.
Now, we know that after a decade of conflict, the American people are tired of war. Believe me, I am too. But fatigue does not absolve us of our responsibility. Just longing for peace does not necessarily bring it about.
And history would judge us all extraordinarily harshly if we turned a blind eye to a dictator’s wanton use of weapons of mass destruction against all warnings, against all common understanding of decency. These things, we do know.
We also know that we have a president who does what he says that he will do. And he has said very clearly that whatever decision he makes in Syria, it will bear no resemblance to Afghanistan, Iraq or even Libya. It will not involve any boots on the ground. It will not be open-ended. And it will not assume responsibility for a civil war that is already well underway.
The president has been clear: Any action that he might decide to take will be limited and tailored response to ensure that a despot’s brutal and flagrant use of chemical weapons is held accountable. And ultimately, we are committed, we remain committed, we believe it’s the primary objective is to have a diplomatic process that can resolve this through negotiation because we know there is no ultimate military solution. It has to be political. It has to happen at the negotiating table. And we are deeply committed to getting there.
So that is what we know. That’s what the leaders of Congress now know. And that’s what the American people need to know. And that is at the core of the decisions that must now be made for the security of our country and for the promise of a planet where the world’s most heinous weapons must never again be used against the world’s most vulnerable people.
Thank you very much.
SYRIA: On April 14th 1986, Ronald Reagan ordered a series of bombings directed against Libya under “Operation El Dorado Canyon”. This was in reprisal for the “Libyan” bombing of a Berlin nightclub. It is now generally accepted that the “evidence” against Libya had been fabricated. Reagan subsequently gave the CIA “Regime Change” orders for Libya. THAT goal took 20 years to achieve. Both Clinton and George W Bush openly talked about regime change in Iraq. One may be forgiven for wondering whether the CIA have ever been given similar orders in respect of Egypt and Syria.
#SYRIA: The embers of discontent have been glowing ever since the previous owner of the family business that is Syria, President Hafez al-Assad, quelled a Muslim Brotherhood uprising in 1982. Thousands were killed with little reaction from the West……Then in 2011, in the southern city of Daraa , his son and heir, Bashar al-Hassad had 15 children arrested for painting anti-government graffiti on the walls of their school. Small, seemingly insignificant events such as this can often change the course of history. The present killing, propaganda and destruction are just another example. The rest of the world has turned a blind-eye to Syria for too long and much irreversible damage has been done not only to its people but to the country’s infrastructure and culture. There is little doubt that the West wants to see a regime change… but the means to achieve that – whether right or wrong, are not to be found in the navigation system of a Cruise missile, the trigger-finger of a jet pilot or a politician’s vanity. There’s still time to talk.
I’ve often written about the impact of Chaos Theory on modern economics. Usually, it is an unforeseen catastrophe or surprise which impacts negatively on the numbers. Today’s Vodaphone announcement is yet another unplanned-for event…but one which will have a very POSITIVE impact on the UK economy. The pound has already moved positively against the Dollar. Once the institutional shareholders get their hands on their dividends, they will use that cash to reinvest!! For once, it’s ALL good news! Chancellor Gideon can put down those Rosary beads!!
FOR PARENTS: Last year a survey of 19 year-olds indicated that that 285,000 of them had left school at age 16 without a Grade C or higher in both English and Maths and only 21 % of those who had not gained a good grade at age 16 in English continued studying it, along with 23 per cent of those who had not got a C or better in Maths. QUESTION: How many did not continue English and how many studied Maths? That question is very simple arithmetic. However, as a nation, we don’t “do” sums. When I was at Citibank, I organised a voxpops-type street survey in which we asked passers-by to calculate something like “What is 60% of 50?” LESS than HALF of the participants (all adults) were able to give the correct answer……… Today’s much-maligned kids are just as good at arithmetic as their parents…..and by the way….THAT is why most political and economic statistics are presented in percentages rather than in REAL terms! Most of us have NO IDEA what they mean! #NationOFthickos
Children are to keep taking and retaking their Maths and English GCSE exams until they have passed with at least a Grade C. Why single-out English? Did you know that these days, children are passing Language GCSEs such as French, without being able to speak it? Why should English be any different? Things is really went from badder to worsest.
Chancellor Gideon says: “In the housing market outside the centre of London … there is not some kind of housing boom or some dramatic increases in house prices.”……..The Royal Institution of Chartered Surveyors says: “We are experiencing the fastest growth in house prices since 2006, with homes in London increasing in value by more than 8 percent compared with a year ago.”……….You choose.
#Syrian U.N. envoy Ambassador Bashar Ja’afari says that U.S Secretary of State, John Kerry Kerry has “adopted old stories fabricated by terrorists based on fake photos from the Internet.” …..and based on Uncle Sam’s past record of relying on fabricated “evidence”, who is brave enough to argue with him? The Ambassador has also written to U.N. Chief Ban Ki-moon and President of the Security Council Maria Cristina Perceval, asking them to “to shoulder their responsibilities for preventing any aggression on Syria and pushing forward reaching a political solution to the crisis in Syria” …..Now that both Obama and Cameron have bared their teeth and convinced everyone that they still belong to the “Peace through Bombing” style of international politics, they should now do the right thing: Sit down with the Russians and Syrians and talk.
#Syria All those years that we were shooting Irish people and the IRA were bombing in Northern Ireland as well as the mainland….I don’t recall Assad’s old man (Assad Snr.) either condemning the United Kingdom for “killing its own people” or threatening to invade or bomb us. Mind you, the USA was raising funds for the IRA (remember NORAID?), so nothing really changes. http://noraid.homestead.com/
An economy in trouble prints more and more money and by doing so devalues the currency which ultimately becomes worthless.
An education system in trouble prints more and more GCSEs, A-Levels and degree certificates.
The diagram above (for those who did not pay attention at school) is a Standard Distribution curve.
This type of curve represents all sorts of phenomena – especially to do with people. For instance, here in the United Kingdom we might want to look at salaries and how many people earn lots, how many earn very little etc. In that case, the curve might be called a distribution of salaries.
As you can see , the green-coloured area on the diagram represents the majority of us who earn either side of the average wage, the blue areas represent those who earn either a little bit more or a little bit less and the red areas show the lucky ones who earn lots or the very unlucky ones who earn very little.
Intelligence and academic ability also follow this type of distribution. We are not all Einsteins and at the other end of the scale – we are not all morons. Most of us are either side of average.
That brings me to today’s annual GCSE debate and the attendant mantras. : “They’re getting easier.” ” Too many A-grades.” etc.
The figures in white represent the percentage of students that one would roughly expect to score the grades shown from A to F. (With A, B and some C-grades being University material)
At one end, we show a small area in red and (in white figures) roughly the percentage of students that (statistically) we would (statistically) expect to score an A-grade : the very clever ones. The equivalent on the right shows the E-grade. Those are the not-so-bright students who just scrape through.
At the far end (on the right), we have the students that you would expect to fail. I’ve classified them as “F” but nowadays, they are designated as “U” or “unclassified”. What we used to call thick.
Those are the extremes but you can see that most are in the green and blue zones.
That’s not just statistics – that’s life.
The figures in black along the bottom of the above diagram represent the actual percentage of students who have scored particular grades in the last few years. There is a substantial difference between the expected (white) and the actual (black).
It appears that there are very few (normal) average students these days – the ones you would expect to make-up the majority of the population.
This year’s A-level results suggested that about 75% or three in four students are average or above average.
Academics are arguing (quite rightly) that it is difficult to distinguish between clever and exceptionally clever students.
The “experts'” solution was to introduce the A* grade for marks in excess of 90%.
Why not simply “redistribute” existing grades and have an A-grade which is for results of say, 85% and above or maybe 90% and above. Thisd is finally being done but for political reasons, progress HAS to be slow.
The primary issue is that it is difficult to distinguish between average students and the terminally stupid ones. The system is not sensitive enough.
Incidentally, if we are to use the terms “bright” , “clever” and “gifted” we should not be afraid to use adjectives such as “stupid” and “thick”. Otherwise, the morons with degress will have a nasty surprise when they leave the comfort of the “University of false hope” and shuffle into the workplace or more likely, the dole queue.
Firstly, it is not the fault of the students who appear to be over-achieving and who are not really bright enough to attend what is nowadays called “University”.
The combination of aspirational parents, ambitious headteachers, dubious teaching methods, spurious subject matter and league tables have all conspired to fool us all into thinking that we have a cleverer population than is fact.
We are all still hostages to a crumbling old socialist dream spawned by the politics of envy and a desire to massage unemployment statistics.
We are not alone.
Not so long ago, I was in a Middle Eastern country and was chatting to some very bright-sounding Americans. I told them that I was training some senior executives for a well-known oil company and asked then what they were doing. ” We are writing Ph.D dissertations for some local students. We get between $3000-$5000 per document.”
Here in the UK, we already have one foot on that particular slippery slope.
How times have changed.
Many years ago, I recall my school maths teacher handing out examination results.
“Smith !” He bellowed to my friend. “You have scored 6% in Mathematics. You must work harder, boy!”
Smith looked a bit perplexed ” 6% out of what, Sir?”
Fast-forward 40 years. Smith has retired early with about £20 million in the bank.
University is not compulsory and we must stop, think and then return to proper education and proper Universities.
If GCSEs, A-LEVELS and Degrees are devalued any further, I can envisage the day when people will deny having “Qwaleefikashuns” and pride will be restored in non-academia.
Would you want to admit to a degree in Equine Psychology or Surfing?
We should look forward to the day when once again University students read without moving their lips and who can write a decent essay without the aid of “cut and paste”.
Finally, just to show that you cannot fool the real world – over 100,000 University students drop-out after their first year.
Nearly a quarter of all university students FAIL to complete their degrees.
The average drop-out rate is nearly 20% and some “Universities” have a drop-out rate of about 40%.
(For those of you from Sir John Crap Metropolitan University in Lower Uppingham who can read this – that’s about a fifth or nearly a quarter.
40% is twice that or nearly (but not quite) a half.
Sod it! Here’s something to colour in:)
SYRIA Nerve Gas Attack: Foreign Secretary William Hague: “The perpetrators of this atrocity will he held accountable.”…..Frank Gardner (BBC) “It’s doubtful whether those responsible will ever be found.” #AgentContagentHague
The West continues to believe that Democracy means “one man one vote”. Unfortunately, unless several other factors are in place BEFORE the pointless rush to the ballot box, Democracy will NOT work. Democracy works for us because we already have the sub-structure in place. That is to say: 1. A free Press 2. A independent judiciary 3. A reasonable and largely corruption-free civil service 4. A taxation system in which the majority of the population participates and finally 5. Some sort of predictable freely-given support system for society’s weakest. The answer is NOT a large tin box with a slot. Mugabe continues to prove that point as do the most recent catastrophies of Iraq, Libya and Egypt. Here in the UK, the perception is that the Coalition government has begun to dismantle at least TWO of the five pillars of Democracy. It does so at its peril.
The Ministry of Defence spent £70 million on making over 2000 people redundant. It is now rehiring about half of them at a projected cost of £40 million! Obviously part of the government’s job-creation scheme! Perhaps the government should re-prioritise. For instance, the government spends £500 million per year on press, marketing and campaigning with an additional £500 million on “Communications” (spin) . At £60 million, the biggest Comms spender is the NHS. In total, government departments have about 3,300 spin doctors.
After the mess left behind in Iraq and Libya, Western leaders appear to have realised that the days of a “good shooting war” being good for political image have gone forever. Heroic speechwriter-polished phrases and Churchillian posturing are a remnant of a past when the words ” honour” and “bravery” still had currency.
Today, war is recognised as a filthy misery-spawning industry which, like an appalling Grand Prix Circuit, moves from country to country, leaving no more than a legacy of rubble and death. There is no honour in war – there is only pointlessness.
The most bizarre aspect of the whole circus is that the leader of a small cluster of damp islands in the North Sea is always the one who makes the most noise, always hiding behind his younger but much bigger American cousin’s skirts. Collectively, the West feels that its job is to dispense the universally therapeutic remedy of “democracy” – even to those who don’t really want it.
Democracy is not an emollient to be force-fed in the same way that 18th and 19th century missionaries (from exactly the same damp islands) delivered Christianity to the world’s natives.
The Arabs are not even remotely interested in our special brand of democracy. Democracy is their excuse because they know that as soon as they shout “Freedom!” or “Democracy!“, the usual suspects will come riding in, dispensing guns with notions of rescue, egalitarianism and ballot boxes.
Can you imagine revolutions in the Middle East if the family businesses masquerading as governments distributed their oil billions as they should? Would the average Arab be interested in getting shot in the name of “regime change” or “democracy” – if he had a job, enough food, decent housing, a car, TV set, free hospital care for his family and a bit left over? Of course not.
There is no such thing as absolute freedom or unbridled freedom of speech – and that is NOT the product which interests the Egyptian population.
With 77% youth unemployment, their revolution is based in economics not idealism and whatever the West’s response, it will be based on exactly the same criteria.
Politicians are currently gadding about, scattering statistics like confetti and pointing everyone at figures which are not preceded by a minus sign!
It’s time we paused, drew breath and took a closer look at the figures. Before we do, let’s have a go at putting some general perspective on the numbers. In Europe, it is being reported that the E17 (Eurozone) and the E27 (EU) have “grown” by 0.3% and that the figures signal a recovery!! A few points about what 0.3% actually means.
3% means THREE parts in a HUNDRED, so 0.3% means Three parts in a THOUSAND……but there’s more! The percentage change being quoted is the change in nothing more than the PREVIOUS QUARTER (see the top of the table above). That means that even if the figure was -100 and it changed to -99.7, THAT would be a POSITIVE growth of o.3%.
However, if you look at the PERCENTAGE CHANGE COMPARED TO THE SAME QUARTER LAST YEAR (the right-hand column above), the figures remain negative ( -o.7% and -o.2%).
France returned to growth in the second quarter of 2013, boosted by stronger domestic demand, after two straight quarters of decline. However, France’s reported increase in consumer spending is largely as a result of increases in energy prices. It was not an “en-masse” dash to the shops!
Meanwhile, Germany’s economy grew 0.7% in the second quarter (compared to the previous quarter), and when annualised, it was the fastest growth of all the world’s advanced economies.
The Netherlands, whose government has been a strong supporter of austerity, reported a a second-quarter contraction of 0.2%, confirming its fourth straight quarter of negative growth. It remains in recession.
Portugal reported a quarterly growth of 1.1%, Spain -0.1% and Italy -0.2%.
Compared with the same quarter of 2012, the United Kingdom is showing a growth of 1.4%, the same as the United States.
These figures are NOT a sign of the end of the Financial Crisis. That crisis remains firmly in place, with many of the figures indicating little more than the continued recovery from a particularly bad and exceptionally long winter……………… a weather-related catch-up.
We have been lucky enough to obtain a transcript of a telephone conversation between the leader of Britain’s Labour Party, Ed Miliband and Jim Messina who has been hired by the Conservatives to mastermind their attempt to win the next General Election in May 2015 with (for a change) an overall majority – something that they haven’t achieved for over 20 years! There’s a rumour that although David Cameron has secured Mr Messina’s talents on behalf of Tory High Command, Messina was also approached by the Labour Party…..possibly even the Leader himself!
Mr Messina masterminded Barack Obama’s second election victory and is therefore regarded as a miracle worker – which is something that the Labour Party is in severe need of. At the time of publication, Ed Miliband is leader of the Labour Party.
Woman’s voice: Hello, this is James Messina’s Office. Marilyn speaking. How may I help you?
Ed Miliband: Hello. This is Ed Miliband speaking. I am calling from England.
Ed: England. I’d like to speak to Jim please.
Marilyn: England? Is that near London? What was your name again?
Ed: Ed MIliband.
Marilyn: Ted Bilibann?
Ed: No it’s Ed. Ed Miliband. Miliband.
Marilyn: Is Mr Messina expecting your call, Ted?
Ed: No – but I’m the leader of the Labour Party.
Marilyn: The WHAT?
Ed: The Labour Party. Over here, we’re like the Democrats and I’m like Barack Obama..but not…
Marilyn: Not what?
Ed: Er…………….President. I’m not the President of England.
Marilyn: President?……..Who is the President of England if it’s not you, Ted?
(Man’s voice in background : Who is THAT, Mari?)
Marilyn (muffled): Its some guy saying he’s the President of England.
Messina grabs phone
Messina: Hi Dave. Didn’t realise it was you. Mari thought it was that f***ing jerk..er…
Ed: It’s Ed Miliband.
Messina: Yeah! That was the guy! What can we do for you, DC? How’s the gorgeous Sam?
Ed: THIS is Ed Miliband. Is that Jim?
Messina (Muffled) CRAP! er…. Hello Ed. There’s been some misunderstanding……..er Ed. How’s David?
Ed: Which one? They’re both fine thanks, Jim. I wonder if I can have a word with you
Messina: How did you get this number, Ed?
Ed: David Cameron had it written on the palm of his hand hand and I remembered it. I saw it when he was practising those funny salutes in the mirror….. in the Stranger’s Bar toilet.
Messina: So, Ed. What do you want?
Ed: We, the Labour Party want to win the next General Election and we wondered whether…..er…..you would consider helping us to achieve our goal.
(Sound of muffled but uncontrollable laughter from Messina. One minute later, he returns to the phone)
Messina: Sorry about that, Ed. I swallowed something and it went down the wrong way…..
Ed: That’s OK, Jim. I was saying . Would you like to be my election guru and help me to win the next General Election? Please?
Messina : Sorry Ed. I’m very busy at the moment.
Ed: If it’s a question of money…that’s not a problem. I have lots. Well, to be perfectly honest I don’t have the cash but I know some powerful people who do and they say they’ll be able to contribute..er..
Messina: Let me be frank…er….Ed. I have a reputation and don’t normally HAVE to associate with losers.
Ed: So you haven’t signed with the Conservatives then, Jim? (laughs)
Messina: Can I speak frankly, Ed?
Ed: Yes of course, Jim. Fire away…as we say over here!
Messina: Sure you won’t be offended, Ed?
Ed: No Jim. Go ahead. Let me have it! (laughs)
Messina: Ed…you haven’t got a f***ing chance of winning. That is why I’m already working for Dave and the Conservativerers. The Labourite Party is going to get f***ed over if you remain as leader. THAT’s the word on the streets, Ed….Sorry, man….
Ed: Do you REALLY think so, Jim? Heard anything else, Jim?
Messina: Ed……If I talk for any longer than three minutes, it becomes a consultation and Mari is already typing the invoice….
Ed: Will you accept a cheque from UNITE, Jim?
Messina: ANY United Nations cheque is good enough for me, Ed. I have great respect for Kofi Ananan.
Ed: But he’s ….er…..er….never mind..You were saying…?
Messina: They say that you are like a guy called Kinnock….all wind and p**s, Ed…..
Ed: Neil was a great leader…who says that, Jim?
Messina: Everyone, Ed. THAT and the fact that you have no policies.
Ed: I HAVE! A European Referendum is one. Then there’s our intention to cut down on Social Security benefits. Then….
Messina: Those are Dave’s policies, Ed……..You stole them.
Ed: No, Jim. I thought of them first. Ed and I did.
Messina: You’re confusing me Ed….
Ed: Ed Balls.
Messina: So I’ve heard.
Marilyn (in background): Mr Messina, it’s time for your Orthodontist and Pilates.
Messina: Sorry, Ed. Have to go but the best of luck in the election….although I’m going to have to take you apart between now and then!! No hard feelings, eh?!
Ed: F*** you!
Messina: You too Ed…….Bye!
The Conservatives have hired Obama’s very slick election guru, Jim Messina to help them to an overall majority in the 2015 General Election. Labour, on the other hand, has recently LOST its own election strategist, Tom Watson. His recent media performances suggest that his strategy would have been to bore people into voting Labour.
USA: THE DEMOCRATS ARE COMING: New York Mayoral candidate, Anthony Weiner is in more trouble as explicit messages which he sent to an unnamed young lady are published. The messages include pictures of his penis. Mr Weiner’s wife is standing by him. As she is an aide to former U.S. Secretary of State Hillary Clinton, she is very familiar with the trials and tribulations of American politics . In spite of the scandal, Weiner is still running neck and neck with his primary opponent, Christine Quinn, who was the early front-runner. If Ms Quinn is elected, she will be the city’s first lesbian mayor. God bless America!
The new Deputy Governor of the Bank of England is to be JOHN CUNLIFFE. Currently, he’s the British Permanent Representative to the EU. As Head of the European and Global Issues Secretariat from 2007, he used to be Gordon Brown’s Advisor on International Economic Affairs and on the EU. He remained in the post until 2012 when he moved to Brussels.
Greece: it’s never as simple as you think!
Greece has one more condition to meet to get the next 2.5 billion euro (2.15 billion pounds) sub-tranche of bailout money from the temporary euro zone bailout fund EFSF on July 29, the chairman of euro zone finance ministers Jeroen Dijsselbloem said on Wednesday.
“Greece has satisfactorily implemented the prior actions required for the release of the next disbursement under the financial assistance programme, except for one action whose adoption by the Greek Parliament needs to be completed by Thursday, 25 July,” Dijsselbloem said in the statement.
“Subject to confirmation of compliance with the last outstanding prior action, national procedures may thereafter be finalised and are expected to be completed by 29 July,” the statement said.
“Once this process has been satisfactorily concluded, the EFSF will be authorised to release the first sub-tranche of the next instalment, amounting to 2.5 billion euros,” it said. (R)
Below is the transcript of Andrew Marr’s conversation with Prime Minister David Cameron, on the subject of Lynton Crosby, the Conservative Party’s “campaign consultant” and his input or influence on the question of cigarette packaging.
I do so without comment (it would be superfluous) – apart from reminding DC that a “question” is merely a request for information.
“So can I ask you again whether you have actually talked to him (Crosby) about this issue?”
“Well I think it is important this issue of lobbying because, well look, let me be clear he has not intervened in any way, on this or indeed on other issues and the decision, it’s very important people know this, we haven’t actually changed our policy, I mean, I think there are merits to plain paper packaging for cigarettes, we need more evidence, we need greater legal certainty, we’re not going ahead with it right now, but I certainly don’t rule it out for the future.
“So the whole thing actually, from start to finish has been something of a media invention. So, he hasn’t intervened, it would be wrong for him to intervene in any way, the decision was actually taken by me, sitting up there (points towards building in No. 10) at my kitchen table, let’s not move ahead with this now, we don’t have enough evidence, there’s too much legal uncertainty.”
“But let’s be clear, this government has been very tough on tobacco, you know we have said we’ve got to cut down on these vending machines, we’ve got to stop big shops doing big promotions, we’ve carried on with the smoking ban, we’ve put up the price of cigarettes, and if we’re too much in hock to the lobbyists as it were, why have we just published a lobbying Bill?”
“You have told me absolutely everything except the question that I was asking, which is have you talked to Lynton Crosby about this?”
“I have answered the question; he has not intervened in any single way.”
“You haven’t actually prime minister, but you won’t tell me whether you have talked to him about it?”
“I think as I’ve said, he hasn’t intervened in any single way, I think you’ll find that is an answer.”
“Yes, but its not quite an answer to the question I asked.”
“But its all you’re getting (laughs).”
“There we go.”
There’s a European Summit in Brussels. This is when the EU leaders tell everyone what MUST be done. It’s a sort of Brussels Pass-the-Parcel but the music is on a perpetual loop and never stops.
Here’s the AFP report on the game so far:
BRUSSELS — European leaders on Thursday tried to come up with new measures to tackle the crisis-hit continent’s soaring jobs crisis, but the head of the European Parliament warned that the plans were “a drop in the ocean”.
“We’re here to fight youth unemployment, a most urgent concern for our societies,” European president Herman Van Rompuy said as he opened the summit to which trade union leaders had also been invited to attend for the first time.
Shortly before the Brussels summit began, the European Union clinched a deal on its trillion-euro budget, which opens the prospect of the 27-nation bloc being able to quickly disburse billions of euros to help the one in four young Europeans currently out of a job.
“Today we have agreed on this budget that will make investment in Europe possible,” EU Commission president Jose Manuel Barroso said of the compromise that still needs to be approved by EU lawmakers.
“This is the growth fund for Europe,” Barroso said.
The talks were briefly held up by Britain’s demand for clarification on a rebate from farming funds — an issue already agreed in February, EU diplomats said, with one source saying the issue “has all been sorted.”
British Prime Minister David Cameron’s reiteration of the rebate issue ruffled a few feathers but most leaders said the fallout of Europe’s devastating economic crisis should take centre stage at the summit.
Prime Minister Antonis Samaras of Greece, which has the highest unemployment rates in Europe, said as he arrived for the summit that the key aim for the leaders was to come up with “drastic measures”.
“Unemployment in countries like mine has sky-rocketed,” Samaras told reporters.
The jobless rate for young Greeks is the worst in Europe — at 62.5 percent — followed by Spain at 56.4 percent, Portugal at 42.5 and Italy at 40.5.
Analysts warn the unemployment rate will continue to rise as the eurozone recession grinds on and that there is little the European Union itself can do, with much of the burden shouldered by national governments.
Among the measures being considered is a proposal to speed up disbursement from next year of a 6.0-billion euro ($7.8-billion) fund for young unemployed.
Other EU funds could also be tapped for such projects.
But European Parliament chief Martin Schulz played down the proposals being discussed.
“Releasing 6.0 billion euros to fund this new youth employment initiative is a start; but, as we are all only too well aware, that six billion is just a drop in the ocean,” Schulz said.
German Chancellor Angela Merkel, who faces elections in September in a country largely weary of funding struggling southern European states, warned that budget discipline remained key.
“The main thing here is about improving our competitiveness,” she said. “It’s not about creating more and more pots of money.”
Europe-wide, talk of a “lost generation” and concern over popular discontent are feeding support for extremist political parties and fuelling animosity towards EU institutions.
A Pew Research survey last month branded the European Union “The New Sick Man of Europe”, showing favourable opinion of the EU slumping from 60 percent last year to just 45 percent now.
“The European project now stands in disrepute across much of Europe,” it said.
But Eastern European states continue to bid to join the bloc of 500 million people and Croatia on Monday will become the 28th EU member in the first accession to the club since Bulgaria and Romania in 2007.
Serbia is expected to win endorsement at the EU summit on Friday to begin membership talks no later than January after having agreed to tough conditions to normalise ties with its former province Kosovo.
Albania is also hoping its membership bid will win fresh support from elections over the weekend that were won by the opposition in a landslide in a vote that was being closely watched by the European Union.
But officials privately worry about including more troubled economies into the European system and citizens from the core EU states are increasingly opposed to enlarging towards the poorer east.
Copyright © 2013 AFP. All rights reserved.
Have you noticed that almost imperceptibly, the world has split along a 2008-weakened fault line. It is now a world of two halves. In 2008, governments rushed to the aid of their sick banks and five years later they’re still at their bedside. Like a bad parent who gives too much attention to one child, most of the politicians’ thoughts remain with the banks while we languish “Home Alone”.
The rest of us continue to feel like an organ donor being kept alive – but only just …….for no other reason than the benefit of the sick patient. At any moment there may be yet another call for a cash transplant but increasingly, it seems as if the patient’s needs are without end.
One thing we do know for sure is that the bond between politician and banker is now so profound that the politician would even sacrifice himself before he would even consider turning off the life support.
I have pointed out on several occasions that many of our politicians but specifically our Prime Minister, David Cameron have fallen into the habit of using a new kind of language. It purports to be all about ACTION, delivered in extremely weird exhortary terms which give the (false) impression of achievement and initiative. It is anything but.
Here is the transcript of the so-called Lough Erne Declaration on tax evasion. There are no dates, no specific responsibilities and certainly no action points. In short….it says NOTHING.
I have highlighted the “SHOULD” word, which the Coalition Government and its leaders continue to confuse with action or “WE WILL”.
(The first paragraph is just full of “truisms”…..what some might call BS :
The Lough Erne Declaration 18th June 2013
“Private enterprise drives growth, reduces poverty, and creates jobs and prosperity for people around the world. Governments have a special responsibility to make proper rules and promote good governance. Fair taxes, increased transparency and open trade are vital drivers of this. We will make a real difference by doing the following:
- Tax authorities across the world should automatically share information to fight the scourge of tax evasion.
- Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where.
- Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily.
- Developing countries should have the information and capacity to collect the taxes owed them – and other countries have a duty to help them.
- Extractive companies should report payments to all governments – and governments should publish income from such companies.
- Minerals should be sourced legitimately, not plundered from conflict zones.
- Land transactions should be transparent, respecting the property rights of local communities.
- Governments should roll back protectionism and agree new trade deals that boost jobs and growth worldwide.
- Governments should cut wasteful bureaucracy at borders and make it easier and quicker to move goods between developing countries.
- Governments should publish information on laws, budgets, spending, national statistics, elections and government contracts in a way that is easy to read and re-use, so that citizens can hold them to account.”
A WISH LIST disguised as an ACTION LIST.
We know that (at least) the USA’s NSA (National Security Agency) has direct access to the PRISM companies’ servers. Above is what used to be a secret slide which describes its intent very clearly.
But what is PRISM – apart from its obvious connotations to spying, terrorism or Ian Fleming’s SPECTRE!?
It is the codename for a US government surveillance programme and has been in existence since 2007 . Its purpose is to monitor foreign communications which pass through US computer servers.
There has already been a lot of debate about the existence of this proactive programme designed to spy – and not only on possible terrorist or criminal targets. The scope of PRISM is far greater because to identify the bad guys, it is inevitable that the government also has to snoop on the good guys. Why? Because the bad guys don’t only communicate with other bad guys so it is inevitable that perfectly innocent messages and site visits are monitored- but that it not the most serious issue.
The most frightening issue is that a government has given itself powers and IT IS NOT WITHIN A GOVERNMENT’S MANDATE TO GIVE ITSELF POWERS.
Any democratic government’s powers must come from the people. Unfortunately, on this occasion, we are too late and the seeds of tyranny have already been planted.
This genie is well-and-truly out of the bottle!
The “terrorism” excuse has previously only been used in order to excuse illegal invasion, destruction or state-sanctioned assassination. But, because we have now become totally conditioned into believing the “as long as the word ‘terrorism’ is in the sentence, it’s for your own good” excuse, we all have the status of potential terrorists.
Make no mistake, this is no “one-off”. Here is a list of what is under surveillance (and don’t forget – it is indiscriminate).
Audio and video chats, photographs, e-mails, documents, and connection logs… Skype can be monitored for audio when one end of the call is a conventional telephone, and for any combination of “audio, video, chat, and file transfers” when Skype users connect by computer alone. Google’s offerings include Gmail, voice and video chat, Google Drive files, photo libraries, and live surveillance of search terms.
So the next time you are considering an intimate SKYPE “one-on-one” with your boyfriend, girlfriend (or both!)…..think! There could be a government operative at Langle, Beijing, the Kremlin or GCHQ watching (purely for “terrorist” and “for your own good” reasons, of course!).
Finally, PRISM’s first collaborator was Microsoft – way back in 2007. Here’s another slide showing the timeline of when the others came aboard.
David Cameron on yesterday’s barbaric murder in Woolwich: “On our televisions last night, and in our newspapers this morning, we have all seen images that are deeply shocking. The people who did this were trying to divide us. They should know something like this will only bring us together and make us stronger.”
Sorry Dave but this was a numbingly tragic murder of a young soldier by a psycho. It was not the Blitz or the Battle of Britain.
This was a nutter dispensing uber-violence to an innocent serviceman who was in the wrong place at the wrong time – so please do not imbue the crazy bastard with any higher motive such as “.…trying to divide us”, followed by a shockingly bad speechwriters “counterpoint” : “…bring us together”.
DC’s short “speech” outside No.10 was scrotum-shrinkingly embarrassing and inappropriate. It was “Speechwriting by Numbers” at its very worst.
In future, can we please dispense with the pseudo-Churchillian platitudes and soulless “sincero-talk”. Thank you.
p.s. Either hire a decent speechwriter or next time, ask Boris to do it.
A few months ago, David Cameron led a trade delegation to China. Then he cleverly followed up by having a meeting with the Dalai Lama – which really pissed off the Chinese and screwed up any goodwill he may have accidentally created in Beijing. Today, he is in Washington, meeting President Barack Obama. Does anyone know when DC is meeting Al Quaeda or does he have Iranian President Mahmoud Ahmadinejad popping into No 10 for prayers and afternoon tea?
Obama “launches campaign”. Obama “seeks donations for healthcare law”. Obama “urges Congress….”. Those are the verbs of a struggling leader. Getting the increasing feeling that The President’s power is dissipating and he is gradually becoming purely ornamental…….
Malta’s banking sector is eight times larger than its GDP; about the same as it was in Cyprus before the rescue. Nevertheless, the official line is that Malta unlikely to follow Cyprus, Ireland, Greece, Portugal and Spain into crisis. That’s a relief! ……NOTHING can possibly go wrong in Malta….Financial shocks?…..”We spit on financial shocks!” Remember…you read it here first. Malta is safe….(!)
Several months ago, I wrote about the strange new exhortary but meaningless style of oratory designed in the 1960s by the Soviets for use by their shiny-suited Party apparatchiks. It expresses no commitment or intent but cleverly disguises non-commital nonsense as both achievement and the promise of future achievement. SEE HERE.
Eventually, this hortatory nonsense was seized-upon by Eurowonks and has now been in European Union use by Brussels Commissars for a few years.
It has now been adopted by our own David Cameron!
In its simplest form it is the art of saying “We MUST” and never “We WILL”
As an example, here’s an extract from the last week’s Queens Speech Debate:
DAVID CAMERON: “That is what this Queen’s Speech is all about: rising to the challenge of preparing this country for the future. We are in a global race and the way we will win is by backing families who want to work hard and do the right thing. To do that, we must get the deficit down, not build up ever more debts for our children. We must restore our competitiveness so that British businesses can take on the world. We must reform welfare and pensions so it pays to work and pays to save, and we must reform our immigration system so we attract people who will benefit this country, and we clear up the mess we were left by the Labour party.”
Neither he nor Chancellor Gideon have ever said “We WILL get the deficit down”, “We WILL restore our competitiveness” etc…..and notice the standard government cliché which ends so many of the Coalition’s sentences these days! (underlined above).
Two minutes and three paragraphs later in the same speech, the Prime Minister delivers a variant:
DAVID CAMERON: “We need to get the deficit down, so we will complete a spending review by the end of June. We will legislate to abolish needless bureaucracy such as the Audit Commission. We will pass laws to raise revenue by stopping tax abuse. We need to restore our competitiveness…………”
The only times when definite intent is expressed is also demonstrated above: “We WILL complete a spending review,” and “We WILL legislate”.
Legislation is what a government DOES! Overused Reviews, Inquiries and Commissions are all substitutes for proper decision-making. They are this government’s 9ct hallmark and will be their legacy.
Must try harder.
It’s good to see UKIP’s Nigel Farage maintaining a dignified silence whilst the Conservatives begin the process of gentle EU in-fighting which will inevitably culminate in a challenge to David Cameron’s crumbling leadership. The bonus being that if DC goes, then so does Chancellor Gideon. Now who’s a clown?
Defence Secretary Philip Hammond has joined Micheal Gove in giving David Cameron a major EU-headache …..and this may only be the beginning. One wonders how many more of the Cabinet will “come out” in the next few weeks. The only other thing that Gove and Hammond have in common is that each sees himself as future Conservative leader…..so their perceived duplicity is not as straightforward as it seems. Mind you, there is a member of the Tory High Command who will definitely NOT share in any Cabinet “I am Spartacus!” moment. It is DC’s very own “Uncle Tom”, Grant Shapps. The Manchester Poly “old-boy” is playing the long game.
It used to be said that one of the biggest corporate lies was “I like a man who speaks his mind!” Nobody likes someone who tells it straight – especially if there’s an element of implied criticism.
When a company director says to an underling “Tell me what you really think about our latest initiative” what should the response be? You honestly believe that it is a crock of shit but you also know that it was the directors “baby”. If you’re wise and familiar with office politics, you tell the director exactly what you know that he wants to hear. On the other hand, if you’re a highly principled idiot, you are likely to tell the truth (your truth). That sort of response can come under the heading of “a novel way to resign”!! It is not worth the risk.
UKIP leader Nigel Farage is a straight-talking man and tells us what we want to hear – but he is obviously no idiot. He tells it straight and his disciples continue to multiply. He has two things which give him a great advantage over other party leaders. Firstly, he has what Boris Johnson has – Charisma….a carefully-cultivated roguish old-school, charm……. and he smiles a lot. Yes…it’s THAT simple!
Of course, he has the added advantage of an Establishment-led Coalition government which gives the perception of being utterly incompetent. The Labour Opposition has no discernible “bite” and is led by yet another charmless product of Planet Politics. The other bit of the Coalition (the small bit) is already in terminal decline – a full two years before the next general election. For our mate Nige, it’s like shooting fish in a barrel.
Nigel Farage can do or say whatever he damn-well pleases and there’s no-one around with the balls to censure him. He is the enemy of all the other political parties, and coincidentally they are also the voters’ enemy. But more importantly, he is the sworn enemy of the self-serving bureaucratic edifice that is the European Parliament.
His election campaign started not a few weeks ago but leapt into life months ago in Brussels as Farage demanded of Van Rompuy: “Who [the f***] are you…..?” That was the moment when many of us , whether we agreed with his politics or not, fell in love with Uncle Nigel. [The parentheses above and their content are mine!]
There was none of the political correctness which constrains David Cameron. If pushed, you can imagine Nigel saying “Barroso! you’re a twat!”- not that he would….but he has imprinted his personality on the national psyche so powerfully….that we now believe that he WOULD say what many of us are thinking.
Farage’s other great plus-point is that although he is the son of a stockbroker and attended Dulwich College, he went to work(!) (as a City commodities broker) at the age of 18. He has exactly the sort of background that the Conservatives would dearly love their leader to have.
So, as Nigel and his disciples march out of the wilderness into the political sunlight and as UKIP party contributions and sponsorships accelerate, what’s the future for the other parties?
Make no mistake, the Tory Starchamber’s Illuminati are looking very closely at their own Party leadership, as are the Trade Union leaders who set the drumbeat for the Labour party.
In the first instance, we can expect a clumsy lurch to the Right from David Cameron in a desperate attempt to woo back former Conservative supporters and hopefully, the other Miliband bought a return ticket.
Whatever the mid-term future holds, we are in for a very interesting two years.
May 2015 will be upon us very quickly!
In tomorrow’s Local Elections, too many United Kingdom voters are going to “dump” their votes. They are going to dump them either by voting for a fringe party or (hopefully!) for an Independent.
In the United Kingdom, fringe parties (quite rightly) are tolerated but that doesn’t necessarily make them all acceptable. Many are a joke and are meant to be a joke.
Let us have a look at Local Elections – they tend to be the ones with the lowest voter turnout, yet on a day-to-day basis, we are affected far more by our local politicians that by the Westminster Mob.
Currently, our perception of Members of Parliament has taken a big “hit” and we now regard them as a load of unscrupulous, self-serving, incompetent Muppets and some may say that the same could apply to local Councillors.
There was a time when party politics had nothing to do with local elections. Hopefully, one day, local politics will return to the election of individuals who are best suited to manage and control local issues and budgets. Unfortunately, the local politician, much like his Westminster cousin is a pack animal rather than a free thinker with your interests at heart.
Every Party has individuals that we can all admire, irrespective of our own political affiliation. There are examples of politicians who are or were good at what they do, but importantly, their skills and abilities have little to do with their political allegiance or Party.
You should not be voting Labour in your local election because , for instance, you have a good Labour MP within your constituency or because you have a shrine to Ed Balls. You should not be voting Conservative because your mum was once photographed with Margaret Thatcher. You should not be voting Lidem because Nick Clegg once shook your hand and you should not be voting UKIP because you heard Nigel calling Van Rompuy a prat in Brussels.
Neither should you be voting for a total unknown of indeterminate political persuasion because he “looks nice” or withhold your vote because you have been upset by the Westminster expenses scandal or by the excesses of a particular Conservative, Liberal or Labour MP.
Try to avoid the “They’re all the same waste of f*****g space!”Syndrome.
At local level, we should all be asking ourselves just one question: “Can this individual be entrusted with the responsibility of representing me effectively in on the Council and will he (or she) have my best interests at heart.”
Forget expenses, forget David Cameron’s leadership issues, forget the fact that the Tory front bench is portrayed as a bunch of “yaboo-sucks-to-you” Toffs, forget Chancellor Gideon’s perceived incompetence, forget Clegg’s silly hair, Miliband’s scary looks or even the fact that Nigel seems like a good bloke.
Vote for a local candidate that you believe will do his best for YOU.
Having said all that, there is far too much political posturing at local level – too many of them fantasise about being at Westminster. Consequently, they attempt to ape their Westminster heroes, so that too much energy is given over to political in-fighting rather than concentrating on the needs of the local voter – but that’s all part of the present game!
Finally, remember that not all Liberal Candidates are vegetarian lecturers and white-collar public-sector workers. Not all Conservatives are barristers, middle-managers and skinheads, not all Labour candidates are teachers, media people or union members and not all UKIP members are ex-BNP nutters or disaffected, deselected or dumped Tories.
At local level, vote for individuals and not (just for the hell of it) for the wrong political party – and certainly don’t bother with the “we need to send a message to Cameron” type vote. Trust me – he will not hear your message
To be on the safe side, find a good solid Independent candidate – just beware that he or she isn’t a main party supporter in temporary disguise!
The European Union is drafting a law which will make losses for larger savers a permanent feature of any future banking crises. (They looked at Cyprus and they liked what they saw!!). However, they also say “Depositors should be the very last to suffer losses when a bank collapses.” This type of “double-think” is another example of the legislators failing to deal with fundamentals. The Root Cause of past , present and future banking crises is very straightforward. It is the banks’ headlong rush for profits which can only be achieved through sucking cash out of the real economy. Banks should NOT be making such vast profits – all they really need is a reasonable operating margin. Banking is a business whose only TWO functions are to protect and redistribute money. Currently, they are doing neither very successfully.
(Reuters) – Five years after the onset of the global financial crisis, the world economy is in such a chronic condition that the European Central Bank might cut interest rates this week and the Federal Reserve is likely to indicate no let-up in the stimulus it is providing the U.S. economy…. http://reut.rs/Y6R8sk
UKIP: Nigel Farage on BBC Radio 4’s World at One: “I’ll be honest with you, we don’t have the party apparatus in a very short space of time to fully vet 1,700 people. We have made people sign declaration forms, expressing the fact that they’ve never been part of political parties that we consider to be wholly undesirable. By that I mean the BNP. And, you know, we ask people if there is a problem with a criminal record or whatever else it may be, please tell us. I have no doubt that amongst those 1,700 one or two people will have slipped through the net that we’d rather not have had.”
The head of Barclays investment bank, Rich Ricci is about to retire after having received an £18 MILLION bung from the company. The payment was announced on the last Budget day – probably to ensure that the news was well-and-truly “buried”, with the Chancellor taking on the role of temporary Barclays shield.
Mr Ricci was at the helm when the LIBOR-rigging scandal broke but it would seem that a quiet gold-plated exit rather than recrimination, continues to be the favoured option for senior bankers.
No-one has suggested any “naughtiness” on Mr Ricci’s part – but at worst, the LIBOR stitch-up was a major breakdown in management – by him, by his boss (Bob Diamond) and the Barclays Board. That begs the inevitable questions:
What does a senior banker have to do to face sanction or prosecution? What exactly is the message which the Government and the Regulation Industry wish us all to hear?
It’s probably: “Screw the system, screw the clients, say sorry and piss off with a handful of wedge.”
Or are we missing something?
Here’s a Mirror assessment of Mr Ricci from two years ago: http://www.mirror.co.uk/news/uk-news/inside-the-life-of-barclays-banker-rich-115678
Never mind all that “Debt as a percentage of GDP” nonsense. Here’s a picture of government debt on a simple picture, courtesy of ukpublicspending.co.uk.
It is OUT OF CONTROL.
All steep graphs are scary, no matter which way they’re pointing. Make no mistake, the above graph is so scary and the Chancellor is running out of options so fast, that we are about to reach a very significant and critical moment in Britain’s social and economic history.
Because Chancellor Gideon has well-and-truly painted himself into a corner and is greedy for cash, he will soon become like a schoolkid with his nose pressed up against the sweet-shop window. But what will he be looking at? Surely, there’s nothing left to plunder.
Currently, our savings are languishing in banks, gradually losing their value. Investment rates are lower than inflation and currently it seems as if the differential will continue to increase. THAT will erode our savings at an accelerated rate.
Dormant bank savings accounts have already been looted in order to fund one of the Chancellor’s rapidly growing array of “schemes” to stimulate the economy. On this occasion, the booty (up to £400 MILLION) will be destined for the Big Society Bank (remember?) which has now been rebranded BIG SOCIETY CAPITAL (BSC). Forty percent of BSC shares are owned by Barclays, HSBC, Lloyds Banking Group and RBS (They are preference shares which means that in the event of a collapse, the banks will have preference over other shareholders).
So what could the Chancellor and the banks be planning next? What happened in Cyprus ought to give us a clue.
As a country, we are not spending enough. One way to encourage us to spend would be to threaten our savings either by way of a levy (tax) or seizure.
You may be thinking “Yes, but surely, our savings are protected?” Yes, they are. The capital is protected but our cash is not protected against taxes.
Within four to five years, the government will have to find about £70 BILLION per year JUST in order to fund the interest payments on the money it owes. So where will it find the money?
It is there somewhere. Here’s a clue:
The richest 1% of our population, many of whom famously squirrel away their cash offshore, won’t be affected and neither will the large corporations – they pay tax when they want to plus they are also lucky enough to be able to decide how much to pay.
That leaves the ordinary Saver and Depositor.
The only thing that the government needs to decide is how to present the raid on our money so as to disguise what essentially will be a tax. There are several ways in which the exercise can be delivered.
For instance, a Cyprus-like levy. Simple and straightforward.
There may be some sort of government share-offer, designed to relieve us of our cash or even a mandatory Government Bond which those with a certain level of savings will be bound to purchase.
I would suspect that even Pension Funds are no longer safe.
But the really scary thing is that because this will be a concerted and choreographed international assault by governments and banks, there will be nowhere to run.
We are well and truly “All in this together”………well….most of us.
During the last week, the disingenuousness of the rabble-rousing Socialist press has plumbed new depths. In fact, in the last few days, they truly dived the Mariana Trench of modern journalism. They have taken every opportunity to vilify a confused 87 year-old lady who finished her days not within the homely intimacy of family life but in a London hotel surrounded by hired help. We may deduce that in her final days, not only the gutter press but even her own family failed her. They all failed to deliver on something quite prosaic….Humanity.
Luckily, with the whole world watching, the British people did deliver. They stood and threw flowers. They cheered and they clapped. Admittedly, there were a few morons who turned their backs and jeered at Margaret Thatcher’s coffin as it passed – but WHY? At whom was their gesture aimed? Obviously not at La Thatcher because she was dead. Was it aimed at the world? That could not have been the case because these were mostly sad , anonymous small people and their 5-seconds of TV fame would not even have registered.
It was all pointless, as were the “parties” and protests organised by those massively over-romanticised Men with Shovels who used to dig coal from the ground. Get over yourselves, lads!
Inside St Paul’s, a tear flowed down Chancellor Gideon’s cheek. He appeared to be blubbering over his spiritual heroine. What’s wrong with that? Does that make him a wimp? Only in the jaundiced eye of the Socialist hack. Here’s just one of today’s headlines: “A CYNICAL attempt to prove he’s human!”
We ALL cry – or should I say….we all SHOULD cry.
I cried when I held my first child. I cried even more when the fifth one arrived. I cried when I touched my father’s cold face as he lay in his coffin. I always cry when I hear “O Holy Night”. I’ve cried watching a screaming man burn to death in an upturned mangled car. I cried when the police called me to attend an accident and I saw two dead kids. One was still holding his teddy bear…..and I always cry at funerals because they remind me of stuff which I don’t normally think about.
I am not a wimp and neither is George Osborne. There is nothing wrong with empathy, compassion and humanity.
Tomorrow and over the weekend, bullshit-hardened Socialist hacks will be ladling bucketloads of their own brand of cynicism over us like sub-zero Vichyssoise. The Chancellor has given them “an angle”.
The protesters – the anti-Thatcher brigade – are not just angry at a lady who they believe wronged them, their families or their friends. They are angry at a malformed distorted legend fed by a million words of misrepresentation, exaggeration and embellishment. It’s been going on for over forty years, starting on rattly old battered Remingtons in peeling hot Fleet Street offices in the middle of town and will finally end somewhere south of the Thames on nice new Flat Screens in the air-conditioned splendour of a newspaper office somewhere on an industrial estate. THAT’S how long this great lady was among us.
Then…..when you’ve all had your fun………….may she finally rest in peace.
This has been one of the most cited stats in the public debate during the Great Recession. Paul Ryan’s Path to Prosperity budget states their study “found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth.” The Washington Post editorial board takes it as an economic consensus view, stating that “debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.”
Is it conclusive? One response has been to argue that the causation is backwards, or that slower growth leads to higher debt-to-GDP ratios. Josh Bivens and John Irons made this case at the Economic Policy Institute. But this assumes that the data is correct. From the beginning there have been complaints that Reinhart and Rogoff weren’t releasing the data for their results (e.g. Dean Baker). I knew of several people trying to replicate the results who were bumping into walls left and right – it couldn’t be done.
In a new paper, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed Herndon et al. to see how how Reinhart and Rogoff’s data was constructed.
They find that three main issues stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don’t get their controversial result. Let’s investigate further:
Selective Exclusions. Reinhart-Rogoff use 1946-2009 as their period, with the main difference among countries being their starting year. In their data set, there are 110 years of data available for countries that have a debt/GDP over 90 percent, but they only use 96 of those years. The paper didn’t disclose which years they excluded or why.
Herndon-Ash-Pollin find that they exclude Australia (1946-1950), New Zealand (1946-1949), and Canada (1946-1950). This has consequences, as these countries have high-debt and solid growth. Canada had debt-to-GDP over 90 percent during this period and 3 percent growth. New Zealand had a debt/GDP over 90 percent from 1946-1951. If you use the average growth rate across all those years it is 2.58 percent. If you only use the last year, as Reinhart-Rogoff does, it has a growth rate of -7.6 percent. That’s a big difference, especially considering how they weigh the countries.
Unconventional Weighting. Reinhart-Rogoff divides country years into debt-to-GDP buckets. They then take the average real growth for each country within the buckets. So the growth rate of the 19 years that U.K. is above 90 percent debt-to-GDP are averaged into one number. These country numbers are then averaged, equally by country, to calculate the average real GDP growth weight.
In case that didn’t make sense let’s look at an example. U.K. has 19 years (1946-1964) above 90 percent debt-to-GDP with an average 2.4 percent growth rate. New Zealand has one year in their sample above 90 percent debt-to-GDP with a growth rate of -7.6. These two numbers, 2.4 and -7.6 percent, are given equal weight in the final calculation, as they average the countries equally. Even though there are 19 times as many data points for U.K.
Now maybe you don’t want to give equal weighting to years (technical aside: Herndon-Ash-Pollin bring up serial correlation as a possibility). Perhaps you want to take episodes. But this weighting significantly reduces the average; if you weight by the number of years you find a higher growth rate above 90 percent. Reinhart-Rogoff don’t discuss this methodology, either the fact that they are weighing this way or the justification for it, in their paper.
Coding Error. As Herndon-Ash-Pollin puts it: “A coding error in the RR working spreadsheet entirely excludes five countries, Australia, Austria, Belgium, Canada, and Denmark, from the analysis. [Reinhart-Rogoff] averaged cells in lines 30 to 44 instead of lines 30 to 49…This spreadsheet error…is responsible for a -0.3 percentage-point error in RR’s published average real GDP growth in the highest public debt/GDP category.” Belgium, in particular, has 26 years with debt-to-GDP above 90 percent, with an average growth rate of 2.6 percent (though this is only counted as one total point due to the weighting above).
Being a bit of a doubting Thomas on this coding error, I wouldn’t believe unless I touched the digital Excel wound myself. One of the authors was able to show me that, and here it is. You can see the Excel blue-box for formulas missing some data:
This error is needed to get the results they published, and it would go a long way to explaining why it has been impossible for others to replicate these results. If this error turns out to be an actual mistake Reinhart-Rogoff made, well, all I can hope is that future historians note that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in Excel.
So what do Herndon-Ash-Pollin conclude? They find “the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim].” [UPDATE: To clarify, they find 2.2 percent if they include all the years, weigh by number of years, and avoid the Excel error.] Going further into the data, they are unable to find a breakpoint where growth falls quickly and significantly.
This is also good evidence for why you should release your data online, so it can be probably vetted. But beyond that, looking through the data and how much it can collapse because of this or that assumption, it becomes quite clear that there’s no magic number out there. The debt needs to be thought of as a response to the contigent circumstances we find ourselves in, with mass unemployment, a Federal Reserve desperately trying to gain traction at the zero lower bound, and a gap between what we could be producing and what we are. The past guides us, but so far it has failed to provide an emergency cliff. In fact, it tells us that a larger deficit right now would help us greatly.
[UPDATE: People are responding to the excel error, and that is important to document. But from a data point of view, the exclusion of the Post-World War II is particularly troublesome, as that is driving the negative results. This needs to be explained, as does the weighting, which compresses the long periods of average growth and high debt.]
As recently as 2009, banks’ investment fees were higher in Europe than in the United States. Nowadays, Europe is delivering only about a quarter of total investment activity, with the corresponding collapse in fee income.
Mergers and Acquisitions (M&A) used to be the investment banker’s bread and butter but nowadays, European bankers appear to be either dozing at the wheel or they’ve left the building! Or perhaps they’ve forgotten how to do it!
In the last year American acquisitions were up by about a third whereas in Europe, they appeared to be too busy sitting on their cash, playing the markets and endlessly “rebuilding balance sheets”.
Before the 2007 crisis, the European dealmaking level was about three times as high as today. In the last year, only about $750 billion in deals was announced. Six years ago, it was over 2 TRILLION!
Europe’s global share of M&A activity is now less than one third – the lowest in 10 years. In fact NINE OUT OF TEN of the largest deals in the last 12 months have been executed by US teams.
Equity Capital Markets are showing the same trend.
In EMEA (Europe Middle East and Africa), issuance (offering securities in order to raise funds) over the last 12 months has been about $145 billion. That is well down on last year. Compare that to an increase of nearly 50% in the USA!
Even Asia has overtaken EMEA which is now delivering only about 20% of global issuance. As recently as five years ago, it was nearly 40%.
The conclusion? European Corporates are waiting (they do have cash) and the banks have become lazy and preoccupied with their political debt games.
So what are the politicians doing to make the banks on this side of the Atlantic more profitable? Very little.
Unsurprisingly, subsidiarisation (breaking up or threatening to break up banks), “ringfencing”, bonus caps and financial transaction taxes are all serving to make Europe a structurally much less profitable region.
You see, the banks too are being made to suffer their own kind of austerity by the politicians.
Add to all that the 2013 craze of blatantly robbing bank depositors and the outlook continues to feel depressingly negative.
The Eurozone crisis has managed to morph from a plain old currency crisis to a debt crisis, an economic crisis and now, a full-blown political crisis – although no-one seems to have noticed…….. and it’s not just the Eurozone:
In the United Kingdom, people are making increasingly indiscreet noises about the Prime Minister’s leadership capabilities and the Chancellor’s questionable competence, as the cold hand of political instability makes a (so far) half-hearted grab for No 10. Currently it looks as if there is already a swing to the right. Nigel Farage and UKIP no longer look like a bunch of extremist Right-wing loonies and as they gain respectability and seats, they will pose a genuine threat to the status quo.
Here’s a quick Grand Tour:
Greece’s political problems are well-documented and this is where the recent polarisation of national politics began with the success and increasing support of the right-wing Golden Dawn Party. Greece is on its knees.
In France there’s the scandal of a Minister and his secret Swiss Bank account with the consequent investigation of all Ministers – shades of the UK’s MP expenses outrage. President Hollande is keeping a very low profile because , let’s face it….he came to the table without any ideas. His mere presence has allowed Marine le Pen and her Right-wingers to re-emerge blinking into the sunlight, ready to build on her father’s legacy.
Germany’s Bundeskanzlerin Merkel is no longer odds-on to win her autumn election and so, in order to placate her detractors, countries such as Cyprus are being put through the debt-wringer and effectively having to bail themselves out! All in the cause of extra Brownie points for the Merkelator.
Many are anticipating more resignations from within the Cypriot government. Michalis Sarris, the Cypriot finance minister who negotiated Cyprus’s bailout agreement with international creditors has already gone.
Portugal’s Constitutional Court has kicked into touch some of the austerity measures imposed on the country by the Eurozone moneylenders. Now the politicians are wondering about how to plug the fiscal gap and Prime Minister Coelho may resign.
Belgium took 535 days to form a government after its last election and now has a 6-party Cabinet.
Italy is struggling to form a government and will most likely hold another election after President Napolitano comes to the end of his tenure as Head of State on May 15th. Goodness only knows what the reaction of not only the Eurozone but of the Markets would be should Silvio Berlusconi (again) rise from the dead! Italy’s political scene has become so surreal that ONE QUARTER of the vote in the recent election went to a protest movement headed-up by Beppe Grillo – a comedian!
Spain’s politicians, including its Prime Minister are mired in corruption scandals – and now there are anti-Royalist demonstrations as a direct result of the king’s daughter being implicated in a government financial rip-off. Mind you, affluent Spaniards have already pulled about $100 billion out of their Spanish bank accounts. They started running early. It’s only a matter of time before the Basques and Catalans start to make their separatist noises.
The difficulty is that one would normally expect the emergence of the Right to be counterbalanced by a strong showing from the political Left. But what Europe has are weak governments , compounded by even weaker oppositions. No European political party in government has over 50% of the vote……. and the less said about the European Union’s politicians, the better! They seem to have elevated ineptitude into an art form.
Currently, Britain’s Left is being driven by Ed Miliband and the New-Old-New-Who-Knows-Who-Cares Labour Party. They earn their salaries through the medium of being critical. They have shown themselves to be totally bereft of a coherent, cohesive strategy and will be directly responsible for the future success of UKIP.
Leadership (or a lack of it) within Germany’s Social Democratic Party will be the main factor which could give Merkel another few years of power. If that happens, the rest of the Eurozone should begin to consider itself as no more than a motley collection of Vassal States……there to do Germany’s bidding. Unless of course, Germany accepts George Soros’ advice and leaves the Euro.
France does not enjoy having a Socialist President and it is right to be sceptical. President Hollande is now totally ignored by Merkel and is doing what he does best – he keeps out of the way as Germany tightens its stranglehold.
Hollande could have been the Eurozone’s great hope but unfortunately is way out of his depth. France now has a negative bond rating by all three rating services and has lost much of its international respect. It’s precarious banking system is just waiting (like many others) to go “pop!”
The Main Event this year will be Merkel’s re-election so the Eurozone states must not expect any major policy changes until then – and when she wins? More of the same – but without the compassion!
What of Europe’s medium to long-term future? Without some sort of political quantum leap, it will inevitably descend into a collection of Third World states but with running water, TV and a banking system totally independent of its economy and probably with its own flag.
Although, in common with many others, I feel a sadness for the passing of Margaret Thatcher, there is one major part of her legacy which recent history has shown to have been an over-sold concept – The Big Bang.
That was the day – 27th October 1986 – when London Stock Exchange rules changed. Jobbers and Brokers became one and the stock market free-for-all began.
It also signaled the coming of the modern Investment Bank.
That was also the day that the City of London became Americanised. The day that the MBAs and the suits showed up and eventually turned an old marketplace into a money-circus.
In 1986, I remember walking into an old Stockbroking firm called Scrimgeour Vickers as part of a Citicorp acquisition team. We had bought it and wanted to see exactly what it was that we had bought! I remember lots of frightened pale-looking people sitting in a sea of dark mahogany and typed paper, looking at us as if we had landed from another planet.
The contrast between us in our sharp suits with our management jive talk and these honest folk was striking.
One of them attempted to break the ice by saying: “This building was condemned in 1948!!” How he and his friends laughed! We didn’t. We were far too important for all that!
We fired most of them and installed new procedures, modern desks and computer screens. We were Gods and, without realising it at the time, a real metaphor for what was happening to the whole of financial services; an almost indiscriminate “Out with the old and in with the new!”
A white collar Revolution!
Margaret Thatcher had been unhappy about TWO main things. Firstly, London was in very real danger of losing its position as a major world finance hub and secondly, the City was ruled by an “Old Boys Network”. In place of the elitist public school stranglehold, Margaret Thatcher meant well when she had dreamed of it being replaced by the mythical “Meritocracy” – a place where people with talent and not necessarily “connected” could play their part.
She also wanted unrestrained competition and ultimately total deregulation, leading to more product innovation and the establishment of London as THE world’s financial centre.
Twenty seven years later, London is still the place to make deals and invest …..and still is the world’s biggest financial centre – but at what cost?
The Labour Government’s deregulation of the banks in 1997 unleashed a Frankenstein which was not recognised by the Financial Services Authority (FSA) until all the damage had been done. The FSA had been too busy looking through the filing cabinets of provincial insurance brokers whilst the banks had been trusted to carry on being as honest and straightforward as they had always been.
No-one appeared to appreciate that those Bankers were different bankers. In fact, most of them weren’t bankers at all.
They were a strange hybrid of Corporate Entrepreneur, pre-programmed to take risks with other people’s money as if it was their own…..and…..they are still doing it!
The global financial crisis certainly cannot all be blamed on Margaret Thatcher’s hopes and aspirations for Britain. But the creation of increasingly complex and convoluted financial products, deregulation and a total failure of successive governments and their regulators to spot bank wrongdoing, is very much part of her legacy.
This is what Chancellor Gideon said about Mick Philpott, the scumbag who killed his own children through an act of gross stupidity:
“Philpott is responsible for these absolutely horrendous crimes and these are crimes that have shocked the nation. The courts are responsible for sentencing, but I think there is a question for government and for society about the Welfare State and the taxpayers who pay for the Welfare State, subsidising lifestyles like that. I think that debate needs to be had.”
These ill-conceived words from an ill-conceived Chancellor have sparked a debate because of the link made between the crime and the Welfare State. Let’s test Osborne’s opinion with a small substitution:
“Shipman is responsible for these absolutely horrendous crimes and these are crimes that have shocked the nation. The courts are responsible for sentencing, but I think there is a question for government and for society about the NHS and the taxpayers who pay for the NHS, subsidising lifestyles like that. I think that debate needs to be had.”
It doesn’t work, does it?
Philpott is the product of an upbringing, a British education, a social environment, a learned set of values and generations of genetic programming.
Juxtaposing the Welfare State and Philpott’s crime was yet another “bad call” in a long list of bad calls by the Chancellor.
The Genesis of the United Kingdom’s Welfare State is to be found in the Liberal Welfare Reforms of 1906-1914, under Liberal Prime Minister Herbert Asquith.
Surely, Gideon and Dave aren’t going to blame the Libdems for this one too, are they !?
There will be a lot of analysis and debate about HBOS and the findings of the Banking Standards Commission – mostly by journos with economics degress who will produce excellent but very technical (and sometimes incomprehensible) remedies and causes for the collapse of what used to be the UK’s 5th largest bank. I was managing a Building Society Head Office is my twenties and have been observing the gradual mutation of the Building Society/Banks for over 30 years. (both from the inside and the outside). I have also spoken to several ex-HBOS managers. Here is it in plain English:
The Banking Standards Commission wants the three men responsible for the demise of HBOS to be prevented from ever again working in the financial services industry and it has told them off! What a punishment! These incompetents should be standing shoulder-to shoulder in the dock and made to answer questions.
Terminal stupidity is not a defense in Law, so they should be prosecuted.
Here are the three main players:
Sir James Crosby is a mathematician and Actuary who landed at the Halifax to run its insurance arm – a business in which many would argue, they should not have been participating in the first place. Five years later, in 1999, he became CEO of Halifax plc. Ironically, in 2008, the then Chancellor, Alistair Darling appointed Sir James to head up a Working Group of mortgage industry experts to advise the Government on how to improve the functioning of the mortgage market.
Andy Hornby was appointed Chief Executive of Halifax Retail in 1999 and finally HBOS Group CEO in 2006 – after the merger wit the Bank of Scotland. He was not a banker as most of his training was at Asda. Currently (and appropriately) he is Chief Executive of Coral, the bookies.
Lord Stevenson was appointed Chairman of HBOS in 2001 – the time of the Halifax/Bank of Scotland merger. He was yet another non-banker who clearly demonstrated at his appearance before the Treasury Select Committee of the House of Commons in February 2009, that he had absolutely no idea of what had happened and the best that he could offer was “Sorry.”
Before its collapse, HBOS was lending at such a ridiculous rate that some of us could already see what was going to happen three years before the final implosion.
For instance, they were using their own valuers to value-up properties so that they could lend 100% (and above). “Lend, lend, lend” and “Sell, sell, sell” were their slogans. If a mortgage case was not up to scratch, the application would be fiddled-with until it was. If a mortgage did not meet in-branch criteria, the prospective borrower was often sent (by the branch) to a mortgage broker whose lending criteria were more generous…..and so on. At the time, you could also walk into a branch, open a current account and be granted an immediate £10,000 overdraft!
In the final weeks of the lending orgy, when management finally realised that the whole house of cards was about to collapse, Halifax branches were being phoned on almost an hourly basis, in order to see how much money was coming in through the front door in deposits! That’s how desperate management became.
They were out of cash.
At the other end of the business – incompetent HBOS “bankers” were making increasingly risky investment decisions with HBOS investors’ cash until they lost most of their bets.
This was a fine old Building Society playing at being a bank!
But why was all this going on? It has been pretty-well established that the management was technically incompetent…but there is another factor which contributed to all this silliness. It was the Government’s promise to safeguard investors’ cash. These executives thought that they were operating in a totally risk-free environment! They could not lose! If they screwed-up (which they did), the government would step in and bail-out HBOS and its depositors out with a pile of taxpayers’ cash – and that is exactly what happened.
The present Coalition government has clearly demonstrated its “Do Nothing” policy in respect of anything at all to do with banking. The odd fine here and there, is purely cosmetic and hardly makes a difference to the operation of either the institution of banking or of its individual members.
It will be interesting to see whether this report by the Banking Standards Commission will generate any government action or whether it will join all the other reports in the poubelle of soon-forgotten examples of banking-industry fraud and monumental incompetence.
If the economy was purring along, companies were forming and not going bust, banks were lending properly (not statistically) and the government didn’t regard any GDP growth above zero as an achievement, most of us would not have any problem with those banker salaries and bonuses.
However, it is not sunny, manufacturing is down and we have a government which appears to be indulging in “Government by Accounting” as an increasingly panicked Chancellor justifies Welfare Butchery (in a newly-acquired Estuary English accent), to an assembled band of Morrison’s workers.
Meanwhile, senior bankers continue to pay themselves more than many of the largest and most successful corporations (the ones that make and export stuff).
As Chancellor Gideon might say these days: “Something ain’t right, innit?”
Since the largely-forgotten catastrophe of 2008, the incomes of many bank directors have increased by up to 60%!
So what else has happened to the banking industry since those far-off days? Oh yes………..they’ve had bailouts totaling BILLIONS, they have mis-sold an array of financial products and the Bank of England has handed-over BILLIONS in Quantitative Easing for a variety of reasons, ranging from the perennial “rebuilding of Balance Sheets” to “Lending to Small and Medium businesses” to “Increased Mortgage Lending” ……(Notice I have placed those increasingly creative QE euphemisms in inverted commas!).
Admittedly, the effect of credit defaults on the banking system leading to those 2008 issues was devastating but the problems were self-inflicted and a direct result of the banks’ reckless leveraging with financial instruments, such as mortgage-backed securities and credit-default swaps. Virtual money……just like Quantitative Easing.
The final straw should have been the LIBOR-fixing scandal…but the Quantitative Easing meant that the banks could easily afford the fines and legal settlements and still maintain those eye-watering incomes.
That wouldn’t be so scandalous if it were not for the fact that LIBOR is used to determine interest rates on student loans, mortgages and many other lending vehicles — and was “adjusted” in whatever direction benefited the banks’ bottom lines and the resultant profits upon which many of those bonuses were based.
The question is – what do the banks have to do in order to stop being the government’s poster boys?
They certainly do not have the confidence of the ordinary investor, because , let’s face it, they don’t really NEED savers and depositors because they can either make cash by “adjusting” and then plundering the equities and bond markets or be given it by indulgent and clueless governments. Small businesses are wary of them because they (quite rightly) fear being ripped off.
There will be further scandals, more fraud, more “faux-outrage” from government Ministers but no meaningful legislation, culture change or reorganisation.
They are truly The Untouchables.
The Markets are in the wrong place. For about two years, I have been suggesting that market sentiment bears absolutely no relation to what is really happening in the real economy.
Yesterday’s Markit manufacturing figures clearly show that Europe’s manufacturing sector is in a mess. At 12% , Eurozone unemployment is at an all time high with further austerity measures to follow.
In spite of all that and with increasing hand-wringing from economists, the markets are buoyant at near-record and record highs, the euro is showing only modest losses and for Bond investors it’s business as usual!
What is going on?
One thing that we can see from the manufacturing figures is that there is quite a marked divergence between Germany and the rest. Although manufacturing activity is shrinking to 5-6 month lows, the so-called “financial fragmentation” across the Eurozone has become increasingly obvious. The Eurozone does NOT have a uniform monetary policy which means that Italian and Spanish banks, for instance, pay much higher funding costs than Germany. That means that certain manufacturers are paying much more than German ones for their cash. On the face of it, that seems to be anti-competitive – but that unfortunately is just one of the many anomalies of the Eurozone – in fact of the entire European Union.
“The poorer you are, the more you pay for your heating fuel.”
This is the backdrop to a largely blinkered , almost “autistic” equities market where we appear to have reached the stage of self-amplification where , because of the abysmally low bank rates, EQUITIES is the only game in town. Self-amplifying? Yes – as more and more investors pile into stocks – mainly because they don’t want to lose out on a rally which they themselves are now fuelling.
The only cautionary note should be for investors who are only just coming into the market to ask themselves “What is the real likelihood of me making a profit?”
When will it stop? History shows us that rallies such as the current one can stop pretty suddenly!
There will come a point at which traders, especially those with short positions will decide “Enough!” – in spite of the fact that currently, there is no obvious level at which to climb out and possibly take a loss.
Once one jumps, the rest are sure to follow.
CYPRUS: Help me to understand this : Bank Depositors are clobbered in one bank but not the other. Then, cross-border money movement is restricted as are withdrawals from individuals’ own accounts. Finally, a large swathe of the population is condemned to many years of unemployment and grinding economic austerity. My question is this: Why is it called “Monetary Union” ? Herman Van Rompuy believes that the Eurocrisis has been averted. IT HAS JUST STARTED.
The United States, the Eurozone and even our own administration here in the United Kingdom have shown us that we are fast approaching the time for a major rethink of the Democratic Model.
The Global Economy is becoming permanently unstable and far too technical to be in the hands of gifted amateurs. Or, in the case of the United Kingdom: the “Gentleman Politician”.
By all means, allow the Elected Ones to fanny about with the politics but sharp-end economics should now be in the hands of professionals who do not constantly keep one eye on the opinion polls and the other on their next election.
There have already been attempts to install Technocrats, e.g. Italy and Greece – but these were no more than economists dressed as politicians, who were then expected to play politics. Inevitably, they crashed and burned.
Cyprus is the latest to demonstrate that politics (of any flavour) coupled with an absolute inability to Manage at Macro level is slowly killing economies.
Some may repeat the “But it’s those bankers” mantra…. and to a certain extent they are correct. However, the Root Cause is the politicians’ inability and unwillingness to manage the banks, themselves and the economy.
Cyprus should not only be a very loud wake-up call but also a watershed moment for Western politics.
Yesterday’s Budget had all the marketing qualities of a statement which is already anticipating the next General Election.
A few give-aways, something for the housebuyer, a little bit for the businessman and of course, a catch phrase!. In fact , the Chancellor provided three:
The Saatchiesque “Aspiration Nation” , another “nod” to Margaret Thatcher in the shape of the “Help to Buy” and of course, “Britain is open for business!”
This was the Budget of a Chancellor who either does not fully appreciate the scale of the United Kingdom’s economic decline or who is trapped but feels that he ought to show willing and fiddle at the peripheries.
Bitter past experience has shown that direct Government interference in the housing/mortgage market always ends in tears. On the face of it, it now looks as if the government may be encouraging house purchase by those who may not be able to afford it. That is what cause the 2008 banking meltdown. Luckily for the Chancellor, there is unlikely to be a big take-up of the “interest-free up to 20%” additional loans which the government is offering. Depending on how the £130 billion in “loan guarantees” is dispensed, it may just be more Quantitative Easing in disguise. Previous form suggests that once cash is handed to the banks by government, the difficulties arise when attempts are made to prise the money from their cold grasping hands. We’ll see!
Let us hope that on this occasion, some of the cash does end up in the hands of the house buyer rather than in Stocks or Commodity speculation by the banks.
The Chancellor’s “Rabbit out of the Hat” 20% Corporation Tax Rate already applies to businesses earning up to £300,000 with a marginal rate being paid by those earning up to £1,500,000. So, for several years, this will mean very little. Yesterday’s CT announcements were for big business only.
The Chancellor’s headline-writers may have had a good day but in reality, commerce has NOT received the shot in the arm which it needs TODAY.
Finally, here’s a bit of lateral thinking: How about the government having the courage to make a massive investment in agriculture. The returns would be in the Exchequer’s coffers far sooner that having to wait for those “forced entrepreneurs” to contribute.
p.s. Gideon……sack your voice coach.
Regrettably, I will not have the pleasure of hearing the hubris-fired reading of the Budget Speech by Chancellor Gideon…..and I do SO enjoy hearing fiction read out-loud!
Today’s press is full of advice for him but unfortunately, he will not be able to stray far from the path he has already chosen for us.
The components of today’s Budget will be cosmetic low-cost “initiatives” , largely fueled by Public Service casualties. Gideon WILL brazen it out by feeding the nation carefully chosen and spun statistics but since he painted himself into Austerity Corner, he cannot move. He will try to give the impression that he is able to somehow warm the economy……. but this one-trick pony Chancellor will do it to the accompaniment of: “Throw another Public Servant on the fire!”
Yes, there may be talk of “saving through efficiencies” but we know that efficiencies are a myth.
“Need a quick £2.5 billion? Sack a load of Public Servants and slash services.” The arithmetic is very simple!
By the way, don’t just blame Gideon. The Cabinet of “yes men” is fully supportive of his fiscal fumbling. They’re right behind him!
Incidentally, the OBR is publishing its latest growth and borrowing forecasts today. More ripping yarns!
The government’s target for the elimination of the structural deficit, in keeping with tradition, continues to slip further and further into the future – where it will remain for many years to come. At the moment, the projected target is 2017/18.
We can already predict that the next estimate may be headed towards 2018/19……and so on.
p.s. I wonder if he’ll mention the banks?
In Cyprus, the government is stealing money. In the United Kingdom, it’s FAR more subtle. They’re taxing bedrooms! How tewwibly Bwitish!
At the Ministry of Truth in George Orwell’s 1984, “Freedom is Slavery”. Here in the United Kingdom we not-only have our own embryonic Ministry of Truth but the prospect of Press Slavery which, in true Orwellian spirit will continue to be promulgated by the politicians as “Press Freedom”. In reality, it is a Charter for society’s influencers to behave disgracefully without sanction. Journalism provides the most powerful Control on behalf of the people. It questions, it exposes and sometimes it gets it badly wrong . The question we have to ask ourselves is whether the occasional collateral damage is worth all the positive outcomes. Today, the expenses fiddlers, the paedophiles, the criminals and the liars are all breathing a collective sigh of relief while several professional “victims” contemplate a new career.
For 24 hours, the world has been focused on the Cypriot small savers who are likely to lose a slice of their cash to the god Euro. However, there are others who may lose a lot more.
According to Moody’s, the Cyprus debt crisis has endangered many Russian banks who work with companies owned by Russian oligarchs who are registered in Cyprus. They stand to lose BILLIONS if the Cypriot government defaults.
HERE’S what Spiegel said about all this last November.
As usual, Eurozone politicians have allowed a drama to develop into a potential tragedy.
Thought: Is this Coalition Government doing itself any favours by constantly measuring itself against the previous Labour Band of Incompetents. In the last THREE YEARS the phrases “The previous Government” and “The mess they left behind” have become standard fixtures in any speech , article or interview delivered by ANY Tory or Libdem politician. Not very aspirational, plus it’s about time that they took ownership of The Mess and stopped demeaning themselves by comparing themselves to the profound tragedy which was the Brown government.
The easiest job in the world is that of either a Tory or Libdem speechwriter.
You take THREE phrases and distribute them randomly on several sheets of blank paper:
1. “Tough Choices” 2. “The previous government 3. “The mess they left behind”
Then join-up the phrases with meaningless scribble but make sure to include the word “MUST” quite a lot (See HERE – it’s the Eurozoneski Method) and add one or two soundbites.
What is the POINT of Regulation? IT DOESN’T ALWAYS WORK!!!!
Before our politicians scratch each others’ eyes out on Monday, fighting over Royal Commissions and Press Regulation, they should consider what good a similar process did to the Financial Services Industry.
Regulation of any sort never works 100%.
Pre the various Financial Services Acts which spawned the Financial Services Authority, the Financial Services Industry was by no means perfect but is was self-regulated.
There was the occasional mis-selling scandal, life assurance salespeople occasionally confused clients’ money with their own and the standard of technical knowledge was below average. Bankers were boring but well-behaved and Building Societies were firmly rooted in the nineteenth century.
Then suddenly, products became more complicated, less client friendly, building societies wanted to be like banks, banks wanted to be like building societies AND insurance companies AND stockbrokers!! Shiny-new MBAs were hired!
………and oh yes………financial product design became marginally MORE complicated than Rocket Science.
More training, more technical knowledge and REGULATION were needed.
So what did all that regulation achieve – apart from creating a self-perpetuating multi-million pound regulation industry?
Well, since the financial regulator arrived on the scene, we’ve been subjected to many new experiences. For starters, there was the 2008 banking meltdown. Then we had PPI mis-selling by the Retail Banks, followed by LIBOR rigging by the Investment Banks. Then of course we had those VERY naughty Interest Rate Swaps which so many SMEs signed up to. There are still many major issues which will have to be dealt with by the regulators, the hugest one being the continued use of Off-Balance Sheet Accounting by the banks.
Regulation? Code of Conduct? Snooping through Filing Cabinets? Reporting Systems? Yet another Quango?
A fat lot of good they all did in financial services!
A basic Media Code of Conduct and SELF-regulation is the ONLY way forward.
Royal Charter or no Royal Charter, self-regulation of the media or a Regulator supported by law and a Bible full of Rules and Regulations will make absolutely NO difference, either to the conduct of individuals or the behaviour of privately-owned media corporations.
Yes, it is an important issue and Lord Justice Leveson has highlighted ALL the right issues but whichever approach is taken, it will make little difference.
The only thing which is important is that the media is NEVER controlled by the State plus that the legislators learn the lesson of the car-crash that is the regulated financial services industry
At the time, John Major was not considered to be a very dynamic leader, certainly not one judged to be a GREAT Conservative leader. In fact, he was a bit of a joke and was mercilessly brutalised by the media, notably by those pesky Latex satirists, Spitting Image. Remember the Grey Major and his conversations with Norma about peas? Remember the Y-fronts and the safety-pin?
Yet he was a good man, an honest man, a straightforward man, a man from humble beginnings. After all, his father had been a circus performer!
At the time of his surprise 1992 election win – when he defeated the windbag Kinnock, he could have represented a new beginning for the Conservative Party.
Briefly, the Conservatives had been in an egalitarian frame of mind. Meritocracy was still on the menu. No more Alec Douglas-Homes, Macmillans or even Heaths. Had the grocer’s daughter from Grantham been the catalyst for a less aristocratic and more egalitarian Conservative Party? Had John Major, albeit reluctantly, picked up the baton on behalf of the lower orders?
We tolerated Major. His image, voice and mannerisms were, let’s face it…. grey and boring. Even the revelation that he had been shtupping Edwina Currie would not have made any difference to his image. But we liked him. He was a Man of the People. The Conservatives had turned the corner. No more Eton and Harrow toffs running the show!
Anyone could become a Conservative Prime Minister.
1992….sounds a long time ago, doesn’t it? Well…..that was the LAST TIME that the Conservative Party properly won a general election.
TWENTY ONE YEARS AGO!!
Our current Rulers are keen on numbers and statistics. Let’s have a look at some.
In 1992, under the lame John Major, the Conservatives won 41.9% of the Vote with 336 seats.
In 2010, under the new dynamic David Cameron, the Conservatives won 36.1% of the vote with 306 seats.
The last (2010) General Election election was less than two years after one of the worst financial crashes in history with the Labour Party under the stewardship of Gordon Brown. He is now widely acknowledged to be one of the worst Prime Ministers in History.
The Conservatives should have won an easy overall majority.
Had the Conservative Party Oberkommando made a fundamental error in relentlessly having pushed forward one of their gilded own towards the inevitability of the top job?
“Riding shotgun” was yet another “hooray”, in the shape of the simpering and credibility-free The Rt Hon George Gideon Oliver Osborne. His only business, industry or commercial experience had been as a Conservative Central Office speechwriter! Suddenly, “The Unemployable One” was running the world’s seventh largest (and counting) economy!
Dave and Gideon between them have rendered the Conservative Party unelectable. They are going to lose the 2015 General Election and they will take the Libdems down with them.
Since the political assassination of Margaret Thatcher, the Conservative Party has shown itself to be lacking int the “Let’s Choose a Leader” department. All you have to do is to look at the array of zombie Conservative Party leaders who have graced the top job since John Major’s severe and politically terminal bout of “Inter-scapular Neuralgia”.
….and now it seems that both David Cameron and Chancellor Gideon are beginning to feel the odd twinge between the shoulder blades. Neither really deserves it because they were both encouraged and promoted to well-above their level of incompetence far too early.
Let’s hope that the next time, The Party gets it right.
We hear a lot about company pensions and their “shortfalls”. So what’s it all about? Many company pension schemes, worried about the UK’s economic volatility decided to invest a larger proportion of their pension funds into bonds. Unfortunately, the Bank of England then decided to try and kick-start the economy by producing lots of new money through Quantitative Easing. That, in turn created a sharp drop in bond yields which forced the pension funds to allocate even more of their investments to bonds in order to try and make up the shortfall in their liabilities. Equity market returns are , on the face of it attractive – but they can also be dangerous by virtue of their unpredictability, especially as many fund managers are expecting a downward “adjustment”. To give you an idea of the scale of the problem, several FTSE100 companies have pension commitments GREATER than the value of their funds. Pension liabilities (money which companies need and will be needing to pay pensions to their retired and retiring ex-employees} are approaching £60 billion. Bond yields, as well increased life expectancy of a company’s retirees are now becoming a major problem. The upshot is that companies will somehow have to make up the shortfall. THAT is why they are reluctant to hire people or invest in their businesses. They cannot afford it!
There’s little point in the medical profession scaremongering about our increasing resistance to antibiotics and the Government’s Chief Medical Officer Professor Dame Sally Davies taking a leaf out of the No 10 Sound Bite Manual and declaring “Antibiotics should be ranked along with terrorism on a list of threats to the nation” and “It’s a ticking time bomb”. Calm down dear and tell your medical mates to stop dishing-out antibiotics like Smarties. It’s not as if you haven’t known about the dangers for quite a few years now.
When will groups such as The Parliamentary Commission on Banking Standards wake up and realise that this government has NO real intention of reorganising the banks.
The talk has moved from buffers to firewalls, ring-fencing, electrified ringfencing , shocks and any number of excruciatingly bad metaphors. As the Commission must have realised by now, the government is cherry-picking its recommendations in order to mollify the Banking Lobby – which is probably the most influential in Westminster.
Today the Banking Reform Bill is being debated in the Commons, no doubt with the ultimate objective of yet more procrastination by a government which seems unable to either manage or take those “tough decisions” which it is always banging-on about. Unless , of course those tough decisions are aimed at and affect the less privileged.
Andrew Tyrie, the Chairman of the PCBS says “”The government rejected a number of important recommendations. We have concluded that the government’s arguments are insubstantial.”
He added: “There remains much more work to be done to improve the bill.”
JUST what the Chancellor and Prime Minister wanted to hear…..and just as long as the argument can continue until at least May 2015.
Banking reform is in the future – and that is exactly where the government intends to let it stay. Indefinitely.
LONDON | Tue Mar 5, 2013 11:46am GMT (Reuters) –
France, Spain and Italy dragged the euro zone into a deeper downturn in February, according to business surveys that showed the chasm between these countries and prosperous Germany widening yet again.
While British services companies had a slightly better month than expected, Tuesday’s purchasing managers’ indexes (PMIs) showed deepening fractures running through the European economy.
The divide Between Germany and France, the euro zone’s two biggest economies, grew to its widest since the currency union’s inception in 1999.
The PMIs reflected how euro zone businesses were faring mostly before the inconclusive outcome of Italy’s general election, which unsettled international financial markets.
“Two months into 2013, we’ve been somewhat disappointed with the Eurozone’s economy’s progress. The PMIs again reaffirm that,” said Victoria Clarke, economist at Investec in London.
“Germany’s doing a bit better than the rest of the pack, but in general, there’s no real sign there of stabilisation, or of the contraction at least bottoming out.”
Markit’s Eurozone Composite PMI, a broad gauge of activity at thousands of companies across the 17-nation bloc, fell to 47.9 in February from 48.6 in January. Although that was a little better than a preliminary reading of 47.3, it was still well below the 50 mark dividing growth from contraction – as the index has been for just over a year.
Euro zone retail sales for January, showing a 1.2 percent rise, were much better than expected, although economists cautioned that the underlying picture was still very weak.
British retail sales also grew at their strongest annual rate in almost two years last month.
The euro rose slightly against the dollar in response to the data. European stock markets also rallied on Tuesday, although led by strong bank results.
Britain’s services PMI, which accounts for the bulk of its economy, hit a five month-high of 51.8 last month from 51.5 in January, beating the median forecast of 51.0 in a Reuters poll.
Economists expect comparable data from the United States will show its non-manufacturing economy maintained a moderate rate of growth, slowing only slightly since January.
Growth among Chinese services companies, which comprise a smaller proportion of its economy compared with Western peers, slowed from a four-month high in February.
BETTING ON THE BANK
For the euro zone, the outlook depends largely on whether Germany can keep up its economic growth and offset struggling France, Italy and Spain, according to Chris Williamson, chief economist at PMI compiler Markit. “(That) seems a tall order, meaning hopes of a return to growth for the region by mid-2013 are now looking too optimistic,” he said.
Williamson said the latest surveys were consistent with the euro zone economy shrinking around 0.2 percent this quarter, with only German strength saving the bloc from a downturn as bad as the 0.6 percent decline at the end of last year.
The European Central Bank meets to decide monetary policy this week, although few economists expect any major announcements this month.
Whether the Bank of England will act this month to help boost the economy is a tougher call, despite Tuesday’s unexpectedly strong services PMI.
Before the data, economists polled by Reuters put a 40 percent median chance on the Bank of England adding to the 375 billion pounds it has spent so far on its asset purchasing programme.
However, the upbeat services number follows dire construction and manufacturing PMIs from the last few days. “Maybe a small glimmer of hope is showing through for the UK services sector amidst deepening gloom for the UK economy,” said David Brown from New View Economics.
He said it was far too tenuous to suggest the services PMI means there was some uplift in economic activity this quarter, taken together with the poor manufacturing data.
(Graphic by Vincent Flasseur. Editing by Jeremy Gaunt)
Here is some simple high-level analysis which always helps to crystallise issues:
The 2008 mortgage-driven banking industry meltdown was directly responsible for the Eurozone debt crisis, political chaos, austerity, recession (in some cases – depression) and mass unemployment.
The multi-billion bank and government bailout costs were borne by the surviving taxpayers through increased taxes, constantly inflating prices as well as erosion of their capital and their pensions.
The ROOT CAUSE of this catastrophe was the design and distribution by the banks of technically ill-conceived products which were designed for no other purpose than to optimise bank profits.
Mortgage Securitisation, Default Swaps, PPI, Interest Rate Swaps etc were (are) all bad products.
Against this background, the British Chancellor, on behalf of the Coalition Government wishes to do everything he can to preserve the banking status quo. An “industry” which continues to grind the economy into the ground whilst sucking more cash out of the economy than it is putting in.
Meanwhile, it declares largely illusory profits upon which to base eye-watering bonuses.
The argument that the financial services industry represents a substantial percentage of the United Kingdom’s Gross Domestic Product used to be a good one!
But if the economic collateral damage being inflicted by the banking industry continues, its contribution to GDP will soon tend towards 100% – once everything else disappears!
(On the subject of Root Causes – the NHS is failing to deliver because it is TOO BIG and over-populated by over-promoted Administrators rather than Managers!)
“Yet it is also true that small events at times have large consequences, that there are such things as chain reactions and cumulative forces. It happens that a liquidity crisis in a unit fractional reserve banking system is precisely the kind of event that can trigger-and often has triggered-a chain reaction. And economic collapse often has the character of a cumulative process. Let it go beyond a certain point, and it will tend for a time to gain strength from its own development as its effects spread and return to intensify the process of collapse. Because no great strength would be required to hold back the rock that starts a landslide, it does not follow that the landslide will not be of major proportions. “
(Milton Friedman & Anna Schwartz)
A Monetary History of the United States, 1867-1960 P207 HERE
Last year, I predicted as follows: “David Cameron will realise that UKIP is a clear and present danger and will begin the fight-back by the only way possible. He will adopt their policies and reinforce that by continuing to spray copious volumes of testosterone in Brussels.” ( #17 HERE )
In spite of the Conservatives’ best efforts to smear the Liberal Democrats with the ridiculously-timed media Lord Rennard “Gropegate” campaign, the Party has been humiliated in the fifteenth by-election of this lame government. The majority of all the other by-elections since 2010 were straightforward and predictable “Labour Hold” results – this one was different. Very different.
If the insufferably smug UKIP leader Nigel Farage struts any more zingily, he’ll injure himself! But who can blame him? The incompetence, the 19th Century policies, the 18th Century verbal jousting and lack of cogent communication by the other parties has helped UKIP to begin their final climb to Westminster.
Both main parties will dismiss this colossal electoral success by UKIP as a mere mid-term blip…and they will suffer because of their total lack of either proper analysis or strategy. To both main parties but especially the Conservatives, UKIP has been allowed to become (ironically) like the Eurozone – it has flourished into a problem without solution. UKIP is here to say.
The way any government operates is very straightforward. The first half of its term in office is given over to imposing the necessary “bad bits” – the policies which are bound to be unpopular.
The second half of its tenure (especially in the final 12 months leading to a General Election) is usually distinguished by the giveaways – the “nice bits”. (Tax decreases, new thresholds, share handouts etc).
This time – it will NOT work. It will not work because , in the final analysis – forget policies and promises….we vote for people we like and trust. The present Coalition government (especially the Tories) have no-one particularly likeable to offer and they have certainly “blown” the last vestiges of any pre-election trust that the electorate had in them.
But the REALLY big tactical error that the Conservatives made in Eastleigh was their choice of candidate, Mrs Maria “I say what I think” Hutchings. She was the nearest that the Tories could find to their own ersatz UKIP candidate.
They thought that they might just fool the electorate…………. and failed.
We’ve already had the traditional “Yes, it’s disappointing but I’m sure that we can win the voters back at the next General Election” announcement from the Prime Minister.
Are you sure about that, Dave?
(BTW – well done Libdems………. and Nick, there’s a difference between “stunning ” and “stunned”!)
There is little doubt that the Eurozone has been so inward-looking over the last few years that the big-picture has eluded it.
Two years ago, I wrote about possible Chinese interest in Greece but it would seem that I was wrong. It is the Russians who appear to be first in the queue.
This is what the Vice President of the Russian Chamber has to say about the Eurocrisis: “This has not been a crisis of the Greek economy but of the European Union and Greece has been chosen as its victim”.
There is massive interest among Russian business people about opportunities in Greece.
In the next few weeks, Russia will be the first country in which Greece’s Investment Bill is presented – after it has been debated in the Greek Parliament.
Unlike Greece’s Euro “partners”, the Russians are showing great interest and confidence in the Greek economy and the Greek people.
The Greek Development Ministry’s General Secretary Tsokas and Simon Kedikoglou (a government spokesman) have already had discussions in Moscow about cooperation with Russian investors. Greek agriculture, tourism, alternative energy sources, pharmaceuticals and even holiday homes for the Russian middle classes were on the agenda.
Whereas Greece’s European ” friends’ ” main focus has been on maintaining the Greek banking system and the “intangibles”, it would seem that there are others who are willing to do what should have been done by Europe in the first place – they’re investing in the Greek economy.
It looks as if the Coalition Government’s policies are finally working and controlling immigration to the United Kingdom.
The only problem is that it is NOT government immigration policies which are having such a powerful effect on the influx of foreigners.
It is the government’s economic policies which are keeping people away.
No-one wants to come here.
The concept of political power crystalised as a left/right divide is in its death throws. UK Political Parties constantly confirm this by this by the politicians’ constant playground squabbles over the political “centre- ground”. Beppe Grillo’s recent success in the Italian elections also suggests that perhaps electors are looking for something concerned more with themselves rather than belonging to one of the “ancient” political herds.
In the UK, the search for a distinction between the two main parties, has returned us to the Class War which we all thought had burned itself out in Margaret Thatcher’s and John Major’s day. It certainly wasn’t apparent during Tony Blair’s tenure at No 10 Downing Street.
In the current “model”, it is usual for two major political herds to constantly battle whilst the smaller factions watch with puny impotence.
So where do the “little ones” glean their support? In the UK, smaller parties such as the Liberal Democrats can do no more than feed off the scraps of those at either end of the rapidly- shrinking political spectrum.
The Left- Right nonsense continues to have ‘legs’ primarily as a result of the efforts of the media ‘opinion-formers’ . Their prejudices and fixed views ensure that the Class War continues to simmer.
Instead of a contrast between the Working Classes and the Upper Classes, the modern argument is between the ‘haves’ and the ‘have nots’ – which nowadays is a subtly different distinction. Nowadays you cannot really spot a ‘have not’ because they may be wearing the uniform and displaying the behaviour of a ‘have’.
We need to find a new set of values……and quickly!
Let’s forget flat-caps, whippets, bowler hats and black rolled umbrellas but at the same time, let’s accept that there are several components which we would ALL like to be included in our new thinking.
Our current political ‘values’ have their roots in past tradition.
We need political values to be in accordance with the one thing which tends to be the MAJOR STUMBLING BLOCK in any political system.
HUMAN NATURE ……married to our basic instinct – not of ‘Community’ but of selfishness. We do it for OURSELVES and NOT our neighbours. That’s why Communism failed.
These are three components which are non- negotiable:
1. FREEDOM 2.SOCIAL JUSTICE 3. EGALITARIANISM.
These basic components do NOT need to be overlaid by a PARTY POLITICAL system because these are ABSOLUTES.
In order to achieve the three components above we need to include an element of both Personal and National WEALTH CREATION.
We therefore also need to promote the dynamic of the BUSINESS ETHOS.
Unfortunately, the word ‘BUSINESS’ has become a bit of an emotive topic BECAUSE of the old (present) LEFT- RIGHT Political system and Feudal thinking.
Business is all about trade, vocation, craft, employment, industry, enterprise, commerce, bank transaction, negotiation, merchandising, making and most important of all – work and employment.
Unfortunately, because of the L-R divide, business has come to mean bosses, workers, management, greed, oppression and profit.
We need to generate a pretty major adjustment in perception and from that, a new ideology.
Capitalism, Communism, Socialism, Democracy etc are not concepts which have been around for ever. However, they do appear to be running out of steam.
Currently we assume that these labels are the only ones which work or have worked. Unfortunately, human experience tells us otherwise.
Imagine existing Political Parties in say 100 years time. They will still be confronting each other in that theatrical way we have come to love. Left and Right hacks will still be stoking the fires of discontent because that’s their job. The Left- wingers will continue to highlight the Politics of envy whilst the Right will continue to be disrespectful to everyone.
Here in the UK, we have a change of administration every 5 years but all that happens is that The Elected Ones merely continue the ‘blame game’ and the playground bickering.
There are visionless “little” people who ALL suffer from politically-induced Tunnel-Myopia. In the grand scheme of things, they are insignificant.
Meanwhile, whilst the puny jousts and rhetoric continue, the interests of the ordinary voter are sacrificed on the twin altars of blind political and corporate interest.
As the politicians become more and more irrelevant to the irreversible arrow of ‘progress’, democracy is being diminished daily.
Unfortunately the politicians’ self- serving vanity and an over- developed sense of belonging (to a Party) continues to cloud their already flaky judgement.
New thinking is needed. It needs a new METHODOLOGY – one based on expertise plus knowledge and NOT in the combative ‘here today- gone tomorrow’ nonsense of partisan politics.
Rhetoric must give way to implementation of scientifically and rationally-derived policies which are untainted by political dogma.
It is most definitely NOT about economics. Economics, as the main divider of political thinking does not, for instance, have anything to say about human nature or morality or human values – which are the factors which destroy every Economic Theory.
The mathematical formulae and conjectures of the economists are no longer enough.
We do need Capitalism. We need a form of Welfare Capitalism but we need it with a healthy dose of Sociology and Anthropology but with its roots embedded firmly in pragmatism rather than the economics-derived abstract thought and conjecture.
The New Thinking needs to start now- especially since five years ago, when capitalism was effectively destroyed by the Rentier Capitalism Kleptocracy of the United States – which is now becoming increasingly apparent in Europe. Spain is the last economy to fall to Rentier Capitalism.
What we considered to be a benign form of Capitalism has been infected by its malign cousin and currently no-one has a cure. The cause remains while politicians and bankers continue to attempt to cure some of the symptoms with what appears to be the wrong medicine in ever-increasing volumes. For example, the latest craze of Quantitative Earning.
Quack economic cures will soon have to give way to nothing less than major surgery, followed by a totally uncompromising cure.
An example of the “compromises” which highlight the schizophrenia of the current Party-based political and economic system is clearly demonstrated by the double-think of Thatcherism.
The Thatcher years are remembered for two apparently opposing concepts: The dismantling of many State controls running alongside increased State control.
Nationalised organisations were privatised, thus removing them from State control. State aid was removed from dying industries. Prices and incomes as well as Financial Services Regulation were no longer State controlled and many State organisations were encouraged (forced) to ‘contract out’ many of their functions to the Private Sector, (NHS, Education etc).
At the same time State control was tightened in other areas. Education and Local Government became more centrally controlled, as did the Police. State power was used to control the Unions and State power was used to prevent price- fixing in private industry and commerce.
This sort of Political Schizophrenia continues to this day and clearly demonstrates a lack of ideological coherence.
In fact, it also highlights the traditional view of the two main parties. The intellectual social dogmatism of Labour versus the Conservative avoidance of any real systematic political theory.
Hence the Conservatives’ preference of viewing themselves as the ‘party of common sense’- a phrase one often hears from its leadership.
‘Freedom’ is another often-quoted concept. But is it a REAL concept or maybe just empty rhetoric?
America is (some may argue) the MOST Capitalistic country in the world. It has awarded itself the sobriquet ‘The land of the free’. In fact, there is little understanding of the word.
People do NOT feel ‘free’ because they are told that they are free.
Therefore any new political theory need to examine questions of Social Ethics as well as peoples’ psychological needs.
TRUE democracy HAS to be DIRECT. Modern democracy has dissipated the individuals voice in favour of its citizens handing their voice to someone they may or may NOT have elected.
The Eurozone Crisis has clearly demonstrated that you can have too much Democracy – especially if it generates intransigence because Left and Right views plus upcoming Elections cloud economic judgment.
The changes we need are NOT economic – they need to be a root and branch rethink of the Nature of Democracy and what really underpins it.
It was interesting to see the plans and confidence lavished on the Titanic 2 project!
Especially as there will never be a change of course – in spite of the recent Moody’s downgrade!
(Click on the photo for the report.)
Still wondering why Chancellor Gideon was SO keen on maintaining the United Kingdom’s AAA-rating? Scroll down this speech, made just before the last General Election. I have highlighted the important bit in red. If you then care to read the next few paragraphs, you will see how the Chancellor’s original intentions and promises are developing.
George Osborne: Mais Lecture – A New Economic Model
Rt Hon George Osborne, Wednesday, February 24 2010
Thank you for inviting me to give this annual Mais lecture. Few Mais lectures have been given at a time when the challenges facing British economic policy makers were so difficult and complex as they are today.
Britain has emerged – just – from the longest and deepest recession in living memory, but growth is proving painfully slow to return.
The overhang of private debt in our banking system and our households weighs heavy on future prosperity.
And the public finances are the worst they have ever been in peacetime, with the largest budget deficit in the developed world.
This lecture is about these present problems and the urgent need to take us into a brighter future. But consider this one stark fact about our recent past.
We are coming to the end of the first full Parliament since the Second World War when national income per person has actually declined.
Even through the dark days of the 1970s and the recessions of the early 1980s and 1990s, every full Parliament saw our GDP per capita grow.
But not this Parliament.
When people ask the famous question – “are you better off than you were five years ago?” – this will be the first election in modern British history when the answer from the government must be ‘no’.
My argument today is simple.
Britain has been failed by the economic policy framework of the last decade.
It promised stability, prudence and an end to the cycle – it delivered instability, imprudence and the biggest boom followed by the deepest bust.
We need to head in a completely new direction.
We have to move away from an economic model that was based on unsustainable private and public debt.
And we have to move to a new model of economic growth that is rooted in more investment, more savings and higher exports.
This will require new policies and new institutions.
I want to talk about three crucial components of this new model.
First, a new approach to macroeconomic and financial policy, where we seek to contain credit cycles as well as target price stability.
Second, a new fiscal policy framework, with an independent Office for Budget Responsibility to ensure that public debt is sustainable.
And third, a supply side revolution that releases the pent up enterprise and wealth creation of our country, encourages a nation of savers, and addresses the long term structural weaknesses that no government has ever properly tackled – like poor education and a welfare system that traps people in workless poverty.
In order to ensure that a Conservative Government is accountable, I have set out eight clear benchmarks for economic policy against which I expect to be judged, together with the concrete measures we will take to achieve them.
If they are met over a Parliament then we will have begun to build a new British economic model.
I also want to explain today why starting to build this new economic model is not something we can put off until next year.
We have to get on with it.
There is no choice between going for growth today and dealing with our debts tomorrow.
Indeed we will not have any meaningful growth unless we show we can deal with our debts.
For it is the lack of a credible plan to deal with the deficit that is already pushing up market interest rates, undermining the monetary stimulus that
is supporting the economy, and sapping the confidence of investors and consumers.
It is the lack of a credible plan that has the credit rating agencies threatening to downgrade us unless action is taken urgently.
This is the reality of the situation we are facing.
Those who say we should simply ignore the markets are siren voices, luring us onto the rocks.
For an economic policy maker to rail against the unpredictable nature of financial markets is like a farmer complaining about the weather.
A loss of market confidence could force dramatic tax rises and spending cuts that were indeed savage and swingeing.
That would represent a loss of economic sovereignty.
And those cuts would be far larger than the actions that are needed now in order to retain our economic freedom in the first place.
Far better to be prepared and protect ourselves against the storm.
THE DANGERS OF DEBT
Before I set out the shape of this new economic model, let us first understand the nature of that storm.
No one doubts that there were massive failures of financial regulation over the last decade.
No one seriously defends the fiscal rules, once spelt out in a Mais Lecture like this, which proved unable to prevent the Government running a budget deficit at the peak of the boom.
But we will not draw all the right lessons for the future unless we understand the deep macroeconomic roots of the crisis.
Much has already been written about what went wrong. Much more is yet to be written.
Perhaps the most significant contribution to our understanding of the origins of the crisis has been made by Professor Ken Rogoff, former Chief Economist at the IMF, and his co-author Carmen Reinhart.
In a series of papers and now a book, they have demonstrated in exhaustive historical and statistical detail that while it always seems in the heat of the crisis that ‘this time is different’, the truth is that it almost never is.
As Rogoff and Reinhart demonstrate convincingly, all financial crises ultimately have their origins in one thing – rapid and unsustainable increases in debt.
As they write, “if there is one common theme… it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks that it seems during a boom.”
So while the specific financial innovations and failures of regulation that contributed to the credit crunch were new, the underlying macroeconomic warning signs were depressingly familiar from many dozens of crises in the past.
In this context, all the signals were flashing red for the UK economy: a rapid increase in household and bank balance sheets, soaring asset prices, a persistent current account deficit, and a structural budget deficit even at the peak of the boom.
Our banks became more leveraged than American banks, and our households became more indebted than any other major economy in history.
And in the aftermath of the crisis our public debt has risen more rapidly than any other major economy.
So while private sector debt was the cause of this crisis, public sector debt is likely to be the cause of the next one.
As Ken Rogoff himself puts it, “there’s no question that the most significant vulnerability as we emerge from recession is the soaring government debt. It’s very likely that will trigger the next crisis as governments have been stretched so wide.”
The latest research suggests that once debt reaches more than about 90% of GDP the risks of a large negative impact on long term growth become highly significant.
If off-balance sheet liabilities such as public sector pensions are included we are already well beyond that.
And even on official internationally comparable measures of debt, we are forecast to break through 90% of GDP in just two years time.
Indeed, baseline projections produced this month from the Bank for International Settlements show the scale of the adjustment that is needed to avoid that risk.
Once the costs of an ageing population are accounted for, they calculate that UK debt will rise to 200% of GDP in just 10 years without significant adjustments – that’s higher than any other country except Japan.
The interest payments on that debt would rise above 10% of GDP within ten years and to almost 30% in 30 years – the highest of all the countries they analyse including Greece and Ireland.
The BIS were amongst the few organizations who can credibly claim to have warned about the risks of a global financial crisis, and now they are highlighting the next source of risk.
As they argue, “persistently high levels of public debt will drive down capital accumulation, productivity growth and long-term potential growth potential.”
In the short term, governments should not be “lulled into complacency by the ease with which they have financed their deficits so far” – especially those with relatively weak fiscal frameworks and a high degree of dependence on foreign investors.
For an economy like the UK with such high levels of private debt, increases in market interest rates would be particularly devastating to the prospects of a private sector recovery.
We have been warned.
MONETARY AND FINANCIAL POLICY
The long term implications for our economic policy framework of the crucial role of rapid debt accumulation in causing economic instability are profound.
It forces a fundamental reassessment of the way we conduct both monetary and fiscal policy.
Let me begin with monetary policy.
In his famous Mais Lecture of 1984, Nigel Lawson argued that monetary policy should be the main tool of short term macroeconomic management while fiscal policy should be set for the medium term.
Over time that became the consensus, and it was later explicitly endorsed by the Labour Government.
The monetary policy framework developed too, from the adoption of inflation targeting by the Conservatives in 1992 to the granting of independence to the Bank of England five years later.
Nigel’s original insight remains valid today.
The next Conservative Government will keep the inflation targeting framework because the benefits of anchoring inflation expectations remain substantial.
I have said before that in office we will review, in cooperation with the independent Bank of England, what modifications are appropriate to ensure that housing costs are once again properly reflected in the target – this process is already underway at a European level but there may be a case for accelerating it.
But given the fragility and uncertainty in financial markets, let me make it absolutely clear that we have no plans to change the CPI inflation target, and we will maintain the current arrangements and protocols for making decisions around quantitative easing.
I don’t want there to be the slightest suspicion that the next Conservative Government might try to inflate its way out of the previous Government’s problems.
But it is now clear to everyone that narrow inflation targeting is not in itself sufficient for macroeconomic stability.
Given what we now know about the way that unsustainable increases in debt can cause devastating financial crises, we must be as concerned about credit cycles as we have been about business cycles.
Alan Greenspan and others made the case for ignoring credit bubbles and then ‘mopping up’ when they burst.
But even Alan now concedes that this approach has been shown to have unacceptable costs.
So as economists like Robert Shiller and others have argued, we need a more sophisticated understanding of how financial markets actually work, including the psychology that drives them away from stable equilibria.
And we need an approach that actively seeks to identify emerging imbalances and takes action to reduce them.
The question is what tools are needed to do that.
In the UK, inflation targeting succeeded in anchoring inflation expectations, but the very design of the policy framework meant that responding to an explosion in balance sheets, asset prices and macroeconomic imbalances was impossible.
Because the tools needed to deal with these imbalances had been taken away from it, the Bank of England became excessively focused on controlling consumer price inflation to the exclusion of other variables, as the Bank itself has acknowledged.
And the Financial Services Authority became a narrow financial regulator almost entirely focused on rules-based regulation.
They had neither the capacity nor the inclination to stand back and make difficult judgments about the macro context and the growth of systemic risks.
To be fair they too have also be commendably candid about those failures.
So, while much has been made of how the tripartite system led to a fatal lack of leadership when the crisis broke, the much greater failure was in the years leading up to the crisis as the imbalances built up.
Crucially, this failure was hardwired into the institutional design of the framework, and no amount of tinkering with new committees and new statutory obligations will fix it.
Indeed we are in danger of making similar mistakes in the aftermath of the crisis, with too little consideration of the impact of higher capital and liquidity requirements on overall financial conditions and the pace of recovery.
And despite everything we know about the aftermath of banking crises, there is still no single institution that is responsible for ensuring that the monetary transmission mechanism is functioning as it should, so that policy rates are properly passed through to businesses and consumers.
So we need a wholly new framework.
Some have questioned our decision to put the Bank of England in charge of macro and micro-prudential supervision.
I see it as absolutely fundamental to a new economic framework for monitoring and controlling the growth of private debt in our economy.
Only independent central banks have the broad macroeconomic understanding, the authority and the knowledge required to make the kind of macro-prudential judgments that are required now and in the future.
Of course they must operate with a mandate from, and accountability to, the elected Government, similar to the existing inflation targeting system.
But this new role will inevitably require a degree of judgment and discretion that goes beyond the narrow rules-based system that failed either to spot or prevent the crisis.
And, because central banks are the lender of last resort, the experience of the crisis has also shown that they need to be intimately familiar with every aspect of the institutions that they may have to support.
So they must also be responsible for day-to-day micro-prudential regulation as well.
That case is particularly strong where the banking system is highly concentrated as it is in the UK, where the boundary between micro and macro-prudential regulation is not easy to define.
For example, who could deny that the micro-prudential regulation of a large international bank like Barclays, RBS or HSBC has in and of itself significant macro-prudential implications for the UK economy?
Since we’ve been making this argument about a new model of financial regulation, the intellectual tide has turned decisively in our favour.
The arguments we have made are the same as those that lie behind the direction of reform at the Federal Reserve and in the Bundesbank, and they are argument now publicly supported by the likes of Jacques de Larosiere, Ben Bernanke, and Stanley Fischer – the eminent monetary economist and Governor of the Central Bank of Israel.
The precise tools of macro-prudential regulation must now be the subject of intensive debate, international coordination, and ultimately experimentation.
They may include variable risk weightings for different asset classes, adjustable capital and liquidity requirements, and even more direct interventions in lending behavior, but we should rule nothing out at this stage.
We should also recognize that no system of supervision and regulation will ever eliminate failures.
That’s why we must keep up the pressure for reform so that our banking system itself is more robust to failure and the damage that failure inflicts on the broader economy is minimised.
It would be a tragedy if we ended up with a banking system that is even more concentrated, riskier and more prone to moral hazard than the one we had before the crisis.
More and better quality capital, credible resolution procedures, living wills and more competition are all important parts of the solution.
But I also believe we should pursue international agreement for a levy on the banking system, similar to the levy on wholesale funding proposed by President Obama or the levy already implemented in Sweden, as well as for structural reforms to prevent retail banks with implicit taxpayer guarantees from engaging in the riskiest activities such as large scale proprietary trading.
These would not have prevented the crisis on their own, and they cannot be a substitute for a better underlying macroeconomic and regulatory policy framework.
But together they would help to create a system that is more robust to failure.
These are the new tools and institutions that we need to control the growth of private debt in the future.
They are a key component of moving to that new model of economic growth.
But the bigger risk to our economy now stems from an explosion in public debt.
To entrench economic stability for the long term, we need fundamental reform of our fiscal policy framework.
There is wide agreement among economists on the need for more independent scrutiny of fiscal policy to replace the discredited fiscal rules.
Conservatives first proposed that independent scrutiny more than five years ago. We have now set out in detail how that scrutiny will be performed by an Office for Budget Responsibility.
Let me say a little bit more about this Office, because I don’t think people have fully appreciated what a radical departure this represents from the way Chancellors have put together Budgets in the past.
Everyone can see how the fiscal rules created in 1997 failed catastrophically.
They did nothing to prevent the Government from running a current budget deficit at the peak of the boom.
To coin a phrase, we didn’t fix the roof when the sun was shining.
The flaws in the fiscal rules are now well known – they were backwards looking, so that past surpluses could be used to justify present deficits, and they were adjudicated by the Treasury with no independent oversight, undermining their credibility.
But there is also an emerging recognition in the academic literature that any system of rules is likely to be unsatisfactory – either so general as to be ineffective, or so complex as to be inflexible and impossible to enforce.
Instead there is growing support for the concept of fiscal councils that can bring independent and forward-looking scrutiny to bear on governments.
Institutions of this kind now exist in Sweden, Denmark and the Netherlands.
I believe that just as we need to move away from narrowly defined rules towards greater judgment in financial regulation, the same is true in fiscal policy.
The benefits of fiscal councils for sustainable fiscal policy could be as profound as those of independent central banks for monetary policy.
Evidence suggests that many of the same time-consistency problems that lead to inflation bias when politicians are in direct control of monetary policy can lead to deficit bias in fiscal policy.
Of course the analogy is not exact – unelected bodies should not be given independent executive power over the levers of fiscal policy because of the fundamentally political distributive consequences of decisions over spending and tax.
But the power of a fiscal council to hold politicians to account for the fiscal implications of their tax and spending plans should not be underestimated.
These powerful arguments, and the steady erosion of public trust in official forecasts, lie behind our proposals for an independent Office for Budget Responsibility.
The OBR will be made up of a three person committee, accountable to Parliament, and a small secretariat of economists and public finance experts.
It will be responsible for publishing independent fiscal forecasts at least twice a year around the time of the Budget and PBR, based on existing government policy at the time.
And the committee will publish a recommendation for the amount of net fiscal tightening or loosening it judges necessary for the Treasury to have a better than 50% chance of achieving a forward looking mandate set by the Chancellor.
If the Chancellor choses not to abide by that recommendation he or she will have to explain their reasoning to Parliament, but it would be a brave Chancellor who chose to do so.
At least once a year, the OBR will also publish a comprehensive assessment of the true long term sustainability of the public finances, including off balance sheet liabilities such as public sector pensions, PFI and the likely costs of an ageing population.
For the first time we will have a transparent national balance sheet.
The Office for Budget Responsibility will be up and running on a temporary basis for the first Budget of a Conservative Government, much as the Monetary Policy Committee initially functioned for a year without underpinning legislation.
Sir Alan Budd has agreed to chair the Office for Budget Responsibility during this period. No one can doubt his independence, and I want to thank him for taking this important task on.
Whether I thank him in a couple of years’ time is another matter – but that is the whole point.
So this is how we will entrench fiscal responsibility for the long term, but we also face an immediate fiscal challenge.
In the last two weeks, disagreements within the economics profession over how quickly to tackle the record budget deficit have been thrust into the spotlight.
Before I address those disagreements, it’s worth remembering that there are broad areas of agreement that didn’t exist even six months ago.
There is a recognition that the scale of the deficit and the rapid increase in the national debt cannot safely be ignored, and that public expenditure will have to be cut.
That is something we Conservatives have been saying since the start, and we had to face down those who said that cuts were never going to be necessary.
There is also general agreement now that Britain needs a more credible medium term plan to deal with the deficit, as both the IMF and the OECD have argued.
The Governor of the Bank made this point yet again yesterday, as did the signatories of one of those letters to the Financial Times last week.
So when it comes to identifying the problem, the need to set out a more credible plan, and the case for having that plan independently monitored, there is broad agreement.
Where disagreements remain is on the details of the timing and pace of deficit reduction.
The economists who signed those two letters cautioning against early action are reasonable people who care deeply about the future of the British economy.
But while I respect their position, I take a different view – a view shared by the equally eminent economists who wrote to the Sunday Times, many leading business figures and crucially by international investors.
And that view is simple.
A credible plan is not really credible unless you’re prepared to make a start on it this year.
Otherwise we are trying to persuade people that we will be virtuous, just not yet – and when you’ve been as irresponsible as Britain has been, that isn’t easy.
That is my hard-headed assessment.
And it is driven by three things:
The nature of confidence; the realities of financial markets; and the practicalities of government.
Let me take each in turn.
Those who recommend delay argue that when private demand is weak, cutting government spending too quickly risks undermining the recovery.
In its most simplistic form this argument fails to ask why it is that private demand is weak.
Modern economics understands the importance of expectations and confidence.
Businesses and individuals look to the future, and while they are not the perfectly rational creatures assumed by the theory of Ricardian equivalence, uncertainty over the future paths of tax rates and government spending does play an important role in their behaviour.
This is particularly true when it comes to consumer spending and business investment, and as the Governor has made clear, the Bank of
England tries to take these effects into account when making its forecasts.
So a credible fiscal consolidation plan will have a positive impact through greater certainty and confidence about the future.
Businesses can expand safer in the knowledge that an out of control budget is not going to lead to ever higher taxes.
Consumers can spend safer in the knowledge that mortgage rates will remain lower for longer.
To be fair, a more sophisticated version of the argument for delay also takes into account the complex interaction between fiscal policy and monetary conditions.
It says that at the moment, and for as long as policy and market interest rates remain low, fiscal tightening should be as gradual as possible because there is little scope for more accommodating monetary conditions to accompany it, either through lower market interest rates or through the reaction function of the Bank of England.
And only as and when monetary conditions begin to tighten can the pace of fiscal consolidation be accelerated.
But even this, more nuanced, version of the case for delay is too complacent.
For it brings me to the second consideration: the realities of financial markets.
Experience shows that market adjustments tend to be neither smooth nor gradual – instead reassessments are more likely to be sudden and brutal.
The luxury of waiting for monetary conditions to tighten before embarking on fiscal tightening may not be one that we are afforded.
That is why the experiences of other countries right now, not just Greece but also Ireland, Spain, Portugal, Poland and others, as well as examples like Sweden and Canada in the past, are so important.
If markets start to lose confidence in a country and interest rates are driven up, recovery is undermined and the inevitable cuts to spending end up being deeper and more savage than would have been necessary to maintain market confidence in the first place.
Take a look at the measures the government was forced to implement across the Irish sea.
That is not a risk that I am prepared to take.
Already the yield spread between 10 year gilts and 10 year German bunds is more than 90 basis points, compared to 70 basis points for Spain and 110 basis points for Portugal.
In the most extreme cases, countries that lose the confidence of markets effectively lose their sovereignty.
As Goran Persson, the Social Democrat Prime Minister of Sweden who eliminated a huge budget deficit following a financial crisis and a deep recession in the early 1990s, used to say, “a country in debt is not free”.
This is why credibility is so vital.
Far from accepting “as binding the views of the same financial markets whose mistakes precipitated the crisis in the first place”, as one of last weeks letters to the FT put it, establishing credibility does exactly the reverse – it buys you more freedom from the very real constraints of financial markets.
How much better to make difficult decisions about spending on your own terms and at your own speed than to have them forced upon you on somebody else’s terms?
So undermining credibility by giving the impression that cuts can be avoided, or by suggesting that unexpected improvements in the public finances will lead to more spending, only makes deeper cuts more likely.
But the decisive case for making an early start on reducing our record deficit is not only based on confidence and the need to establish credibility.
It also draws on an understanding of the realities of government – in particular institutional inertia and the difficulty of real reform.
These considerations don’t appear in most economists’ models.
Economists usually talk about fiscal tightening in billions of pounds or percentages of GDP, but cutting spending is not simply a matter of numbers in a Budget Red Book.
It is a myth, perpetrated by politicians, that all Ministers have to do is sit in their Whitehall offices pulling levers, and things change on the ground.
More often than not, the levers aren’t connected to anything.
Real change that drives up productivity is a difficult process.
If unstable financial markets do force emergency cuts, then those are precisely the conditions in which their impact on the poorest in society and the quality of public services is likely to be greatest.
As Gordon Brown told his party conference when he was Shadow Chancellor: “Losing control of public spending doesn’t help the poor.”
Making an early start, on your own terms, creates the space for better targeted cuts.
It will give more time for public sector reforms to take effect so that lower spending is delivered through greater efficiency not cuts to the front line.
And it makes it easier to preserve public support for difficult decisions by protecting the poorest and most vulnerable.
A key lesson from the successful examples from around the world of fiscal consolidation is that you must be able to demonstrate that ‘we are all in this together’ in order to maintain a coalition for action.
So that is why we will make an early start – in order to bring confidence to the economy, establish the credibility with markets that buys you time,
and to ensure that spending cuts are well targeted.
Let me explain how a new government will do that.
There will be three clear phases to our plan of action.
Phase One involves finding out the truth.
Within days of taking office we will establish our new independent Office for Budget Responsibility.
We have put in place the plans and the people to be ready to do that on a non-statutory basis, until the legislation is in place to make it permanent.
The Office will help us publish a truly independent audit of the public finances before the first Budget.
So everyone will know the true state of the nation’s balance sheet.
And everyone will be able to see independent forecasts for growth.
Only then will anyone know the true scale of the fiscal challenge that faces whoever forms the next government.
Phase Two is the Budget.
This will take place within 50 days.
It will set out the overall fiscal path and spending totals that we will stick to over the years ahead.
As I have made clear, our aim will be to eliminate the bulk of the structural current budget deficit over a Parliament.
That is what the Governor of the Bank of England has called for and I agree with him.
The Budget will set out some of the cross-cutting measures on pay, the cost of Whitehall, the review of the pension age, and the largest public sector pensions, that will help to put our public finances on a sustainable footing.
Crucially, the first Budget will also contain measures to boost enterprise, encourage new jobs and show that Britain is open for business.
We will take targeted steps to reduce some budgets in-year – and we have set out some specific examples – in order to build credibility and make a start on reducing the deficit.
The scale of these steps will be informed by that proper audit of the nation’s finances, that independent assessment of growth and discussions with the independent Bank of England about the scope for monetary policy to remain supportive.
At the same time the rest of government will be embarking on the major structural reforms to the public services that will, over time, deliver the lasting productivity gains that drive real value for money.
Phase Three is the Spending Review
Over the Summer we will work flat out to conduct the detailed departmental Spending Review for the years after 2011 that the current government has simply refused to carry out, and publish that results of that review in the Autumn.
The only possible reason why the Treasury has not already produced a Spending Review is that the Government do not want to spell out the difficult decisions that even their own spending plans imply.
We will not hesitate to take the difficult decisions to get Britain working.
A NEW ECONOMIC MODEL
So this is the new economic framework for monetary and fiscal policy that we need to ensure that private and public debt are sustainable in the future.
But given that we cannot go back to the last decade’s debt-fuelled model of growth, the question I am asked most often at the moment, is “where is the growth going to come from?”
The answer is the final part of this new economic model.
The economics profession is in broad agreement that the recovery will only be sustainable if it is accompanied by an internal and external rebalancing of our economy: in other words a higher savings rate, more business investment, and rising net exports.
Economic theory and evidence both suggest that the macroeconomic policy combination most likely to encourage that adjustment is tight fiscal policy, supportive monetary policy and countercyclical financial regulation.
But that on its own will not be enough.
We need a program of supply side reform that is no less urgent or radical than the reforms of the 1980s and 1990s.
When our households, our banks and our government are so indebted, raising the real rate of return on investment is the only sustainable route to prosperity.
All the evidence suggests that Britain’s trend rate of growth has declined over the last decade.
And as we saw in the 1980s and 1990s, supply side reforms can take some years before their full effect is felt.
But a new government presents a golden opportunity to set out a new direction and harvest some of the long term benefits up front.
By embarking upon a series of reforms that will raise the real return on investment, we can raise the rate of investment right now.
That’s why I have pledged that a Conservative Government will use the opportunity of a change of government to send the signal that Britain is once again open for business.
And in order to bring some accountability to economic policy, I have set out eight benchmarks for the next Parliament against which you will be able to judge whether a Conservative Government is delivering on this new economic model.
So we will maintain Britain’s AAA credit rating.
We will increase saving, business investment and exports as a share of GDP.
The plans I announced at the weekend to sell in due course the government’s stakes in RBS and Lloyds will help to encourage millions of people to start saving and investing for the future, often for the first time.
We will improve Britain’s international rankings for tax competitiveness and business regulation with specific measures on corporation tax and regulatory budgets.
We will reduce youth unemployment and reduce the number of children in workless households as part of our strategy for tackling poverty and inequality.
We will raise the private sector’s share of the economy in all regions of the country, especially outside London and the South East.
And we will reduce UK greenhouse gas emissions and increase our share of global markets for low carbon technologies.
But perhaps the greatest challenge is reforming the public sector itself.
The part of our economy that is responsible for delivering this framework for economic success is the one that has performed the worst of any sector over the last decade.
Public sector productivity has actually fallen since 1997.
Indeed if productivity in the public sector had grown at the same rate as in private sector services we could now have the same quality of public services for £60 billion less each year.
A radical program of public sector reform is not just a fiscal necessity, it is vital if we are to deliver the world class education and welfare services that support a competitive economy.
So we will raise productivity growth in the public sector by increasing diversity of provision, extending payment by results, giving more power to consumers and improving financial controls.
We will expect productivity improvements to match the best of the private sector.
And crucially, the Treasury will return to its core role of ensuring value for money for the only interest group it should represent – taxpayers.
There will be no more empire building or attempts to interfere in every area of government policy.
How can I put it in a topical way?
You will have a Chancellor and a Prime Minister united with the common goal of unleashing the forces of enterprise.
Delivering the new economic model that I have set out today will not be easy.
Britain cannot run away from its problems. And if we fail to learn the lessons of the last decade we are doomed to repeat them.
We have to deal with our debts to get our economy back on its feet.
The core values that we need to apply are responsibility and accountability.
Over the five years that I have been in this job I have put fiscal and financial responsibility at the heart of my approach.
I resisted the calls to offer up front unfunded tax cuts. I said that an economy built on debt was living on borrowed time – and so it was.
I have also been straight with the British people about the challenges ahead.
I said that whoever won the election would have to cut spending.
And I have set out the benchmarks against which we can be held accountable.
Our ambition is nothing less than a new economic model for Britain.
Let us move from an economy built on debt to an economy that saves and invests for the future.
Eastleigh electors must make sure that they do not waste their vote in the forthcoming by-election.
There was a time when government had nothing to do with Political Parties but sadly, that is no longer the case. Hopefully, one day all politics will return to choosing individuals who are best-suited to manage and lead. Unfortunately that time has not yet come and so we must make the most of what we have.
Every party has individuals who are good at what they do. Their abilities have nothing to do with political allegiance. Even within the present system – those are the people we should be voting for……….The converse is also true.
We should not be ignoring the Liberal candidate because the previous one self-destructed. We should not be ignoring any able Conservative just because we don’t appreciate the Conservative Chancellor’s approach to dealing with the economy. The Labour handling of the 2008 banking crisis and their leader’s dodgy haircut should not influence us if we have a Labour candidate who looks as if he or she has a positive contribution to make.
What should influence us is simple – which INDIVIDUAL do we believe can be entrusted with the responsibility of representing us most effectively. Our vote should NOT be used to punish a national political party or, for instance the fact that “we don’t like the look of them”.
Blind partisan voting will only give us a random chance of voting-in the finest. At best we will elect a few good people – at worst, we will vote-in a total moron simply because we like the colour of his or her rosette. Nowadays, many politicians are just “ballast”. Remember Blair’s Babes or the present crop of Cameron’s Cuties? They sit in Westminster, nod or shake their heads like Muppets while those with proper views do the talking and decision-making. They are there to do nothing more than vote.
Party Politics has evolved into a Game of Two (and a bit!) Packs. Too much energy is given over to political in-fighting rather than concentrating on the needs of the voter. Just look at Prime Minister’s Question Time and the destructive exchanges between the parties. They are playing “Westminster”! (It’s like Monopoly but nowadays, without the money!)
Even local politicians play “Westminster” within their crude facsimiles of the Commons Chamber (they even have a Cabinet!). Local politics has become national politics in miniature!
Consequently a local by-election result is now considered to be a vote either for or against the Government.
In politics, the “management and business classes” have largely given way to the “talking professions” because the ability to debate has become a more precious skill than the ability to say, manage a budget (and it shows!). The old-fashioned free-thinker has given way to the party pack-animal who will normally vote as the party tells him – the ideology of the party has displaced the common-sense of the independently-minded individual.
In spite of all this, we do need to be represented by local people who have the voters interests and not their own ambitions at their core.
The usual voting turnout during a local election (below 40%) gives strength to the “centralist” argument which is in favour of more and more power being taken away from local people and handed to the political party which “handles” your representative. That is just one of the reasons why it is important to vote sensibly. If we do not vote or just vote for a rosette, we give the impression that we do not care about or want local representation by the best local person possible – irrespective of his or her party allegiance.
We have all noticed that the big parties “parachute” external candidates into constituencies. That’s possibly the greatest insult of all because they assume that our county, town or area is unable to produce a candidate capable of representing us in Parliament.
Finally, remember that not all Liberal candidates are vegetarian lecturers and Guardian-reading white-collar public-sector workers. Not all Conservatives are toffs, barristers, middle-managers and skinheads. Not all Labour candidates are teachers, media people and union members and not all UKIP candidates are racist single-issue nutters.
There is a rarely-printed saying in politics – “Never underestimate the power of stupid people in large groups.” ……………… That’s US – the voters!
So, Eastleigh voters, ignore this week’s media political mud-slinging (it started last week), take a careful look at ALL the by-election candidates, decide which one looks like the best to represent YOU and vote!
The time has come to vote for the individual and not the rosette.
Currently, the UK already pays about £125 million PER DAY in interest charges on debt.
That amount MAY now go up as a result of what we all hope is the UK’s first AND ONLY downgrade – apart, that is from the Fitch plus Standard & Poors downgrades which are likely to happen in the coming week .
There are 2 solutions:
A. The UK to increase productivity and its foreign earnings
B. More borrowing and increasingly creative Government Accounting.
As A is not happening (and no-one really believes that it is going to happen for a very long time), it looks as if our Chancellor’s policies will continue to be geared towards scooping more revenue into the Treasury coffers WITHOUT an increase in the population’s or the country’s earnings or wealth.
The Chancellor does have a Plan B.
It’s the one above……….
(Moody’s announcement of the downgrade JUST before the Eastleigh by-election smacks of extreme naughtiness-with-intent)
The piece below is over 2000 words long and I have just completed it for a client .
It is about the random nature of an economic system.
Have you ever wondered why ALL economic predictions are wrong? Have you noticed that in spite of a proven record of error, economists and politicians continue to bang their heads against the forecast-wall and refuse to do anything else but continue to predict outcomes which by now, they must realise will be incorrect?
They certainly use all the latest computer models which have been empirically derived and used for many years.
So, are there any incorrect assumptions about “fundamentals”?
Is the economic process Stochastic (a sequence of random variables)? Or is it Deterministic (when the output of a system is totally dependent on its initial state and subsequent inputs – and therefore, predictable)?
(Mind you, to add to the confusion, deterministic systems may occasionally produce random and therefore unpredictable results. )
Is economics a question of Stochasticity v Determinism?
Why do I ask the question? Because there appears to be a total absence the ‘stable equilibrium’ predicted by classical economists.
On the contrary, Market Economics behaves like a collection of dynamically unstable systems. The instability is attributed to external ‘shocks’ rather that any fault in the basic concept. There is what can only be described as ‘non lineality’.
One solution to this ‘non-lineality’ is CHAOS THEORY!
So far, no real evidence has been produced of ‘low – dimensional’ Chaos in economic processes but there are definitely discrepancies between the ‘expected’ according to classic economic models and the ‘observed’. Just look at any economic prediction within your memory. It was probably incorrect.
We still have a ‘mechanistic’ view of the world and economics as a ‘hangover’ from 18th century SCIENCE.
Scientific thinking is very simple: ‘Measure, predict and adjust until you no longer have any more surprises. Then keep measuring to confirm that what you measured in the first place can be replicated’.
Economics was conceived on that same principle . It was established as a ‘science’. That’s where the Determinism crept in.
It was at this time that man first considered the possibility of his own intellect being so unconstrained that he would eventually understand the ‘Universe and everything’ through the medium of scientific reasoning.
This principle was applied to all sorts of activities and thinking – including economics.
The so-called ‘Enlightenment Policy’ would help man in his pursuit of happiness. Especially in the sciences. Science was cool and now in the early 21st Century it is enjoying a bit of a revival.
Of all the subjects on offer, Physics became the admired Paragon for Enlightenment and so it continues.
The way Physics works is simple: Carefully describe an environment and you should be able to predict the outcomes of any experiment conducted within that environment.
Likewise in Economics: Know the initial environment and you should be able to predict outcomes based on subsequent inputs.
The belief stemming from that philosophy is that EVERYTHING is governed by ‘NATURAL LAWS’ which are a set of ‘cause-effect’ regularities. That means that everything can be predicted.
These same principles have been applied to Economics.
A simple scientific rule is that ‘The state of any system is a consequence of what it was in the preceding moment…..and so on.’
In the beginning, random occurrences had no place in such linear thinking. Everything was governed by Mathematics and Laws.
However, there is one major flaw in the way that we ‘do’ science: That is our ignorance of the CAUSES which generate phenomena and events.
For instance, we know the effects of gravity – which we can measure but we don’t really know the CAUSE.
However, in spite of our ignorance of the exact causes of events added to the imperfection of our analyses, we still cannot have 100% certainty about the vast majority of phenomena.
Economists also appear to have forgotten both the imperfection of analysis and their ignorance or (at best) of the exact CAUSES of events.
What is the solution? What is to be done about our comparative blindness?
Our ‘crutch’ is the science of probability. Chance.
Current economic thinking is a throwback. In economics, the world is still viewed as totally deterministic.
‘STOCHASTIC’ is non-existent – as is uncertainty because uncertainty is treated as ignorance or a failure to understand the deterministic rules of a very complex system.
Yet, with ALL our processing power, no-one has yet been able to establish those rules which should predict outcomes.
So, as Chaucer wondered in The Nonnes Priest Tale – Travelling from A to B: Freewill or Predestination?
Looking at the unpredictability of economic outcome, we move from linear to non-linear dynamics, from certainty to probability, from Economic Theory to Chaos Theory.
Theories of economics have been shaped by the assumption of ‘Rational Man’ who behaves in accordance with a known set of rules.
The evolution of economics into a science was ‘booted’ into becoming a science when it was ‘mathematicised’. Formulae arrived and suddenly, it became a bona fide branch of Applied Mathematics.
Many of the original people who translated economics into a mathematical form were physicists, engineers and mathematicians…… and it still shows. At that time, their view of the world was ‘linear’.
Does that work in economics? The short answer is ‘no’. That is why economists are struggling, interpreting and making excuses.
Marshall in his ‘PRICIPLES’ compared the study of economics to the study of tides. The number of variables affecting tides means it is impossible to create a consistent dynamic picture.
Even nowadays, there isn’t enough processing power to generate an accurate picture of such a dynamic system, especially as the number of variables affecting such a system is, for all intents and purposes – infinite.
Imagine random stones being thrown into the sea or small outcrops of rock or variations in the seabed. They all have an effect on the ‘shape’ and speed of the tide.
And so it is with an economic system: lots of rocks, stones and other variables.
It is not possible to formulate or predict a picture of such an infinitely dynamic system.
Currently, economic theory appears to predict that any shock to such a dynamic system will (obviously) have an effect on the system but that it will ultimately converge-to or seek either a new equilibrium or ‘tend’ towards its original equilibrium because, after all – that’s what ‘systems’ are supposed to do!
Economic Theory assumes a tendency towards stability and equilibrium with certain ‘oscillatory happenings’ on the way.
So we have a situation where economic thought was (and still is, in most cases) linear, deterministic and quasi-dynamic. That is to say, the ‘set-in-concrete’ notions of certainty, invariant economic laws and sameness……………..rather than approximation, probability and infinite variety.
For instance, the Bank of England predicts an inflation rate one year ahead, based more on hope than fact or perceived fact. But when such predictions are (always!) wrong, there is no revisiting of the thought process, merely another prediction with little or no basis in anything-in-particular.
Often, both ‘inputs’ and predicted outcomes are decided by committee and vote!
All predictions appear to be based on an assumption of an ultimate convergence of economic process to stability, via those periodic cycles which, although not understood are treated with a certain sense of fatalism.
Chancellors are so locked into predictions based on erroneous facts that they will even massage their outcomes in order to land somewhere near the expected landing point – purely in order to retain credibility not only for themselves but also for ‘the system’.
What cannot possibly be countenanced are the random fluctuations of what is most likely a permanently unstable economic system. We don’t do that sort of thing because it may suggest a lack of control!
Let’s have a look at non-linear Economic Dynamics.
Actual (REAL) economic results indicate little resonance with the symmetry and regularity suggested by a linear mechanistic dynamic system. (Something that moves predictably along a pre-determined path).
On the contrary, fluctuations and movements are totally unpredictable. That means that regular Deterministic Laws cannot apply.
If we look at an economic situation in say, the Eurozone at a particular point in time, we may try to predict an outcome in say, 10 years’ time.
However, a small variant or an incorrect assumption in our analysis of the initial economic situation will have an effect on the ultimate outcome. The earlier that variation occurs, the more devastating will the effect be.
For instance Greece’s hidden debt at the time of its accession to the Eurozone, undetected at the time, is having a huge effect on the Eurozone’s economic outcome.
Meanwhile, the economists, bankers and politicians crave and need the comfort of ‘stability’. They know that the further the Eurozone travels from the initial conditions at Greece’s entry into the Euro, the more anomalies“The Greek Effect” will generate. It’s a self-amplifying issue.
Consequently, the bulk of the work of Eurozone politicians is now concentrated on creating a series of ‘faux’ stabilities.
It is the fallout from Stochasticity which is causing fear with Determinism being their comfort and shelter.
It was only 60 years-or-so ago that stochastic considerations were appended to classical economic theory.
But the so-called New Classical Macroeconomics was no more than a compromise. “Let’s introduce a Factor X because we can no longer ignore it.”
Yet, the economists still needed their ‘models’ – because deep down they were still the mathematicians and physicists of old.
A formula was devised (SLUTSKY) which took the linear dynamic business cycle model and added random (not necessarily economic) terms which attempted to explain the real ‘actualités’!
At last, an attempt had been made to explain ‘exogenous shocks’ to an economic system by the introduction of nothing more than random error terms.
But what was REALLY missing in classical economic reasoning was the concept of NON-LINEARITY.
So, the battle was between a Linear Model with a Stochastic Term (a fiddle factor) versus a pure Non-Linear Model.
Obviously by now – 200 years from the beginning, we have to assume that the evidence for linearity in economics has been overestimated!
So, if we agree that we do need a new non-linear model of econonomics, what are we searching for? What are the other ingredients and how do we ‘work them in’?
Do we want a synthesis of economics, psychology, politics and sociology? Or do we simply stick to the notion of determinism?
Human evolution is viewed as a random process (although the way it is often expressed makes it seem as if scientists view it an ‘inevitable linear’).
The evolution of an economic system is also pretty random, except that, applying psychology, politics and sociology, it can never be a system that can develop naturally. (For example, Survival of the Economically Fittest).
Mind you, economists have already had several attempts at introducing the concept of non-linear economics.
Followers of Keynes developed theories which generated Real Business Cycle Theory but any exogenous shocks to the new non-linear system were considered as merely ad hoc disturbances.
Economists could NOT break away from LINEAR THINKING. Linear thinking was being applied in an attempt to imprison a loose and free system, which tended to CHAOS.
The result? More economic models that you can shake a stick at!
It is only fair to say that our understanding of economic phenomena has been greatly enhanced by all these models and formulae…… but still no cigar. No General Theory of Economics. No equivalent of E =mc2….+εe
So Chianella, Pun, Goodwin, Kaldor, Baldrin, Woodford, Barmal, Benhabib etc have all done their bit but we’re still NOT QUITE there.
Unfortunately, for all intents and purposes, many of the models did no more than introduce the concept of economic ‘white-noise’.
Chaotic systems generate their own randomness without need for external input. Therefore in a chaotic system, predictions can ONLY be very short term and even if there were deterministic rules within such a chaotic system, an inability or failure to 100% ‘book’ the initial conditions of the system will always yield forecasting errors.
This all suggests that economic forecasting (except that on a very short time-scale) is a nonsense. PLUS – the bigger the system, the bigger the CHAOS.
That would suggest that a proposal such as a EUROPEAN ECONOMY is a flawed concept because there is very likely to be an exponential amplification of Chaos.
The dynamic of a mega-economy is very different to a housewife balancing the books at home – although economists are still applying the same principles to both.
Unfortunately so far, classical economists continue to resist economic chaotic concepts.
The reason for this apparent intransigence is simple: it is very difficult to extract evidence of chaotic dynamics from economic data – especially on a meaningful scale. Especially if another dose of chaos is injected into the ‘mix’ by erroneous or spurious data.
In order to predict in a chaotic system a VAST (infinite) amount of data is required – far more than is normally available and so far, the search for Chaos in economics has not been successful.
Meanwhile it is Chaos which is making long-term economic forecasting totally impossible and increasingly sophisticated and precise measurement of ‘initial conditions’ incredibly difficult and potentially prohibitively costly.
If we imagine an economy to be like a cloud – subject to all those forces that clouds are subject to, we can see the impossibility of a mathematical model which can predict the size, shape and exact direction of the cloud or even its shape and volume as it travels.
Its ultimate shape will always remain a mystery.
Politicians, bankers and economists ought to be able to say ‘I don’t know’ without us constantly expecting magic answers which do not exist.
For example: ‘Mr Chancellor or Mr Banker – what will be the effect on the economy of billions in Quantitative Easing?’ Correct answer? ‘We don’t know.’
“The initial conditions of a system are always uncertain, while Chaos guarantees that these uncertainties make prediction impossible.” (Heisenberg)
THAT is the essence of Chaos within an Economics System.
Politicians are always looking for new angles and prisms through which to observe and present statistics in the most benign way.
A comparatively recent statistical gem is as follows:
“Almost 30 million people were in work at the end of 2012, an increase of 154,000 on the quarter to September and the highest total since records began, in 1971.”
“Since records began” is quite a new angle and as nonsensical as the rest.
Today’s UK population is about 63.2 million.
The 1971 population in was 55.9 million.
That’s an increase of 7.3 million.
In 1971, unemployment was 2.98% of the workforce. Today it is 7.8%.
The figures don’t lie – they’re just encouraged to do so……..
The United Kingdom’s latest unemployment figures have just been published amid extravagant “progress” claims by the Coalition Government.
Here is a BBC screen from April 2010 – just before the last election:
Here is the BBC screen from TODAY:
DO please click on both images! Your eyes are NOT deceiving you!
We appear to have had a lot of activity and bustle from the Coalition Government but the unemployment figure is exactly the same as it was three years ago.
The government claims to have created ONE MILLION new jobs in the private sector.
That must be the MOST UNPRODUCTIVE block of workers ever seen because they have had no impact whatsoever on National Productivity.
What is occurring? Apart, that is, that MORE of the 2.5 million are now either under-employed and/or part-time.
The latest UK unemployment figure stands at 2.5 million.
Now please read THIS. It is from February 2010 – a couple of months before the 2010 General Election. The UK unemployment figure then was also 2.5 million.
Hopefully, the Coalition will now STOP claiming that ANY of their job creation schemes have worked and STOP telling everyone about the Private Sector jobs that they’ve created – but most of all STOP using the phrase “We have brought unemployment down”!
THAT IS A LIE !!!!
The economy is NOT going forward at all and it is now dawning on the Electorate that this government assumes that that is dealing with stupid voters. Otherwise, why all the half-truths and crudely massaged statistics?
THIS is today’s BBC article. Note the similarity between the two reports.
The numbers in the two articles – three years apart – are EXACTLY the same. Only the dates have changes.
(posted by “Erasmus”….a spygun
So, what are its chances of successfully issuing the bond in the international bond markets?
Quite good! OTE is 40% owned by Deutsche Telecom – although that is NOT the only reason.
CONFIDENCE is the new Euro buzzword.
Even Greece’s Central Bank Governor Provopolous is feeling it. He says that the worst of Greece’s crisis is over because Greek 10 year bond yields have no dropped below 10%! That’s a bankers measure of “confidence!!
In spite of a falling GDP (a further contraction of 4% is expected this year) , unemployment at 26% (and rising), strikes and a very cold Greek winter, according to Mr Provopolous “There is improved confidence” and “We have turned the corner”.
The bank Governor seems to be confusing the ECB’s promise to “do what it takes” to save the Eurozone with internal “confidence”.
In fact, as a result of last year’s declaration of love for the Eurozone by Mario Draghi, ALL Eurozone bond yields have fallen. Greek economic policies have had very little to do with what so far, appears to be the “Miracle of 2013” ……..when Markets are rising and bond yields are falling. The Athens Stock Exchange (ASE) has risen by over 10% since the beginning of the year!
In reality, all the unusual market activity further reinforces that fact that the dislocation between the REAL economy and the virtual money-printing-driven economy is more-or-less complete. The Markets are performing in spite of the economy and NOT because of it.
“Confidence” is all very well…but confidence in what exactly?
Economic recovery or the ability to borrow more?
Whilst Greek politicians are pointing to the fact that Greek bank deposits are increasing, have they forgotten the 50 billion euro recapitalisation which Greece’s largest four banks are still awaiting?
Only THREE MONTHS ago (October 29th 2012), the Greek banking sub index tanked by 13.59% as a result of the unresolved recapitalisation. It remains unresolved.
The only change has been the European Union’s temporary rescue fund which has “earmarked” about 50 billion euros for the Greek banks….and there will be another delay in paying the money over. There always is. June 2013 is the latest estimate.
The “confidence” cannot possibly be related to any future growth of the Greek economy because that cannot happen until the banks have been mended.
Apart from the bank recapitalisation, there is another EU-IMF allocation of 31.5 billion euros for the banks to “restore their balance sheets” so that they can at least think about participating in Greece’s economic recovery.
Greek bankers and politicians may well be feeling “confidence” but can they honestly say when Greece’s 5-year recession (depression) will be coming to an end?
It looks as if Greece’s recovery is firmly embedded in the future . Permanently.
In the Good Old Days, when every day was sunny, there were only two TV channels and Bank Managers weren’t anonymous, every Debit used to have a Credit. Unfortunately, in Banking, this is no longer the case…..but is it only the bankers who were to blame for the hugely creative accounting which resulted in the 2008 banking meltdown?
While we’re all busy vilifying bankers for their greed an incompetence, there is still one group of professionals which has managed to remain silent since 2008.
Here is a table (by no means complete) which shows companies and the results of their 2008 Audit Reports.
|COMPANY||AUDITOR||AUDIT DATE||AUDIT RESULT||AUDIT FEE (Millions)|
|Abbey National||D &T||4.3.2008||Unqualiﬁed||£2.8|
|Bear Stearns||D &T||28.1.2008||Unqualiﬁed||$23.4|
An “Unqualified Audit” is also known as a complete audit. That’s an audit that has been performed and researched so thoroughly that the only possible remaining discrepancies stem from information that could not be obtained by the auditor.
An unqualified audit analyses both the internal systems of control, as well as all of the details in the organisation’s books.
Unfortunately, an audit has to rely on the information provided by the company and as there is often a “relationship” between senior bankers and senior auditors, the auditors have always assumed that the information that they are being given by their clients and chums is accurate and honest.
You can see from the table above that in 2008, every audit signed off every bank as “Unqualified”. A QUALIFIED audit would have meant that a “qualified” opinion would have been given. THAT would have outlined the auditor’s reservations concerning the organisation’s financial statements.
However, so complete was the conspiracy and fraudulent reporting by the banks, that experienced Audit Companies just sailed-by the morass of deceit and misreporting.
Note the fees in the right-hand column. They are in MILLIONS………..NOT that fees measured in so many zeros would EVER have any influence on the outcome of an audit!
So the FIRST question is VERY simple: Should the Bankers AND their Auditors be standing shoulder-to-shoulder in the dock?
The SECOND question is also very straightforward: Shouldn’t the Regulators be working with the Auditors and NOT with the Banks?
BTW, if you’re investing in Equities, do take the time to read J.K Galbraith’s (very short) book entitled “A Short History of Financial Euphoria”. Hopefully, it will help you to realise exactly where Markets are headed and on the day after the banks have climbed out, you won’t be one of the many unable to sell your investments.
Everything that our Coalition government has touched so far has been a train crash. Today’s initiative, announced by the Secretary of State for Transport, will be no exception.
The latest economic miracle-cure is the HS2 high-speed rail link between London and Birmingham ………. and maybe beyond to some of the outer planets such as Manchester and Leeds!
I just want to go on record to say that no matter what the cost assumptions are in respect of this rather grandiose and quite unnecessary scheme, the “guesstimates” made by proponents of the scheme are bound to be incorrect. Why? Because they’re ALWAYS wrong!
The government intends to invest £32.7 billion. Their advisers (whose computations, as we know from bitter experience, are always SO accurate!!!!!) have convinced the Cabinet (and others) that this investment (after factoring-in new job creation, less road congestion and profits from ticket sales etc.) will produce up to £47 billion in benefits!
On the face of it….a “No Brainer”. So…what’s the problem?
The major problem is the Law of Unintended Consequences, such as creating a gradual shift of trade from North to South……. “Accidental” Economic Engineering.
But the most obvious is the cost – and this is why I want to be on the record.
As government is dealing with Private Enterprise it will be ripped off. The Private Sector ALWAYS rips-off the government. It’s a national sport.
I predict that after factoring the pre-scheme aggravation, NIMBYS’ and government lawyers’ fees etc with ongoing expenses such as the crippling financing costs of such a project, this scheme cannot be delivered for less than about £250 billion.
Yes….a quarter of a billion!
£32.7 billion? Don’t make us laugh……and by the way…what do THESE GUYS think? They seem quiet….
(Thanks for your emails . For the moment, I cannot see Twitter or Linkedin. Back later this week.)
I have the answer to our randomly fluctuating GDP figures!
They appear to correlate very strongly to Eric Pickles’ geographical position.
It’s GRAVITATIONAL pull!
Forget all that “Triple Dip” recession nonsense and hysteria.
A more logical way to look at the economy is the exact converse:
The United Kingdom has been in an economic recession for over two years with the occasional anomaly or “blip” which, in certain quarters, has made GDP growth appear temporarily positive.
If we adopt this approach then many more things will begin to fall into place.
These are the GDP figures per quarter since Q4 2010, the time from which we can assume that the government’s policies “kicked-in”.
Q4 2010: -o.4%
Q1 2011: +0.4%
Q2 2011: +0.1%
Q3 2011: +0.6%
Q4 2011: -0.3%
Q1 2012: -0.2%
Q2 2012: -o.4%
Q3 2012: +o.9%
Q4 2012: -0.3%
If we now look at a “Moving Year”, that is to say, starting a year at Q4 2010, taking the four figures in blue and then adding them…..and then taking the next four numbers, starting with Q1 2011 etc, we have these GDP figures for the Moving Year:
+0.7% +0.8% +0.2% -o.3% zero zero
WE HAVE BEEN IN RECESSION or “FLATLINING” SINCE THE YEAR BEGINNING Q3 2011
The OECD statistics are HERE.
As you can see from the table, no matter how our government dresses-up the figures, we are the worst performing nation in this list (apart from Spain and Portugal).
The basic solution is simple. The Chancellor of the Exchequer needs to prioritise Growth ahead of Credit Rating.
Incidentally, much has been claimed by the government in respect of how many jobs they’ve created , WITHOUT any significant increase in GDP or “tax take”.
This could be the reason:
When the Coalition took power in May 2010, the number of unemployed people was 2.51 million. See HERE.
The latest figure shows that there are still 2.51 million unemployed in the United Kingdom. See HERE.
……….and no-one appears to have noticed!
All this banging-on about “THE MILLION JOBS we have created” since coming to power?
(Once again, the government appears to have been “economical with the actualité”.)
The Gates to Economic Recovery and New Prosperity were being guarded by the Bankers.
A tired and bedraggled band of travellers stood before them. They were led by Flashman, the legendary illusionist and Prime Minister of the Ukshire. The Chancellor, the Cabinet and other Uks were busying themselves trying to appear invisible – an ancient trick modeled after the mythical Bank Elders.
Flashman raised his pink chin so as to appear less terrified than he really was. He tried one of his famed rictus-like smiles. “Please let us in!” .
After he had spoken, he looked round to his band of followers who made the customary grunting and “Hear! hear!” noises of approval.
The Bankers were confused and a little frightened but nevertheless, were obliged to follow their elders’ orders.
” You have to pay to come in,” oozed the Banker as he counted heads and flicked at his abacus. His fingers were a blur as he remembered: “…then there’s the insurance.”
” But we have already collected and given you all the gold that we could find. And you did promise than when our coffers were empty, we could come in. It is getting so cold out here. We are tired and hungry and we can see that behind the gates there is sunshine and the New Prosperity. If you will not let us in, would you please lend us a little of our own gold back, so that we can eat . Many are dying”
” That is not our problem. You enjoyed the Old Prosperity when we gave you more than we had. We have no more to lend. Anyway, you look as if you would not be able to repay it.”
” But who are all those smiling happy people who I can see through the gates?”
” They are the Bankers. Are you a Banker?”
” No I am not but there are occasions when I am speaking to an audience – I imagine that I can hear a whisper in the audience.”
” And what is this ‘whisper’ ?” sneered the Banker.
” It seems that there are some who think that I am a Banker – because that is the sacred word that imagine I hear. On some occasions, I can hear it several times. There must be many who think that I am a banker. Can I at least come in? Just to see?”
” Why should anyone think that you are a Banker? Do you receive a large bonus? Do you have ridiculously large expense account? How big are your share options?”
” I have none of the Sacred Trappings – I am merely the Prime Minister of the Uks but there are those who see me nearly as important as a Banker. In fact, sometimes I hear whispers which make me think that the people wish me to be in charge not only of the Cabinet, the country but of even …………………the Bankers.”
Flashman immediately looked down at his feet because he sensed that he may have gone too far. His entourage cowered.
The Chancellor tried to make himself even more invisible and tried to stop himself from laughing by biting so hard into the back of his own forefinger that blood flowed from the wound. As you would expect, it was clear liquid.
The two Bankers both took a step back. They had never heard such an preposterously outrageous claim. “In charge of the Bankers???? Who? You?!!”
They knew in that instant that they were dealing with a “Dangerous” but decided to continue the dialogue.
They had heard the legend that one day, a simple creature would come to the Gates and become “In Charge”. No-one quite knew what this strange phrase meant but they wanted to be sure. Was this “The One?”. They doubted it because the legend suggested that the one who would one day be in charge, was to be a red-headed female called Merkin from the Land of the Goths.
But the pink-faced stranger had just used the sacred “In Charge” words!
It was a joke among Bankers because they knew that no-one but a Banker could be “in charge”. They were the chosen ones.
They used to serve the people but now the people served them.
” Are you ill? What are the people saying?” The Banker took out his Blackberry and punched some buttons. His eyes did not leave Flashman, who continued:
” Sometimes when I am speaking in riddles to the people – I seem to hear not just “Banker” but also “King” Banker. That is the phrase! They call me a ”….King Banker”. That is the phrase I hear.”
” But can you talk in riddles? Can you make money disappear? Are you so self-serving, selfish and thick-skinned that you can ignore the criticisms of all those around you? How good are you at offering help to those who do not need it? Were you unpopular at school? Have you ever given money and then changed your mind and taken it back? Well…… have you. Do you have the Gift of Sneer ???????”
It was like a bolt of lightning. Flashman knew! He was The One !!
He tried his smile once again. Some recoiled in disgust but there were those within earshot who were also beginning to believe that perhaps Flashman was “The One”.
Flashman certainly believed it. He would ask for an Inquiry – just to be sure. He liked an Inquiry – that most holy of Ministerial Sacraments. Meanwhile, he decided to take the bull by the horns – he would assert himself.
” Bring the Head Banker to see me here at the Gates. Tell him that David of Camenor (for that was his real name) wishes to see him.”
There were gasps. Humans, UKs and Bankers looked at each other. For what seemed like an eternity, there was a cold silence – just like the one which would follow a joke made by the Prophet Milibrand the Younger!
Just as suddenly, the beyond-dead atmosphere was broken by a commotion inside the Gates. Word had been sent to the Head Banker. There was no going back!
Eventually, a short man in a black silk pinstriped suit appeared at the gates. His gold tooth and diamond in his chunky gold pinkie ring glistened as he removed his Fedora. The black overcoat remained draped over his shoulders as he approached Flashman.
Flashman noticed that the Head Banker’s white silk tie matched the handkerchief tumbling out of his breast-pocket. He briefly imagined his own finger in the Head Bankers chunky ring!
They stood toe-to-toe. It was the Banker who spoke.
Flashman felt more resolute than he had ever done in his life. This was his destiny. He would be the saviour of the people. This was his time. He cleared his throat.
” On behalf of the people, I command you to lend them the money so that they can enter the Gates of Prosperity.”
It was the briefest and most ” to the point” statement that Flashman had ever made – and he’d managed it without an Inquiry. He felt quite exhilarated and just in case someone was sketching this historic moment, he struck a heroic pose and focused his bloodshot piggy eyes on the horizon.
The Head Banker moved even closer. They exchanged a knowing smile.
Almost imperceptibly, the Banker’s expression changed.
Swiftly, he brought his knee up.
NRA, rather inappropriately targets the Obama girls:
The first lie you’ll hear this year from central bankers is that they intend to stop minting cash to buy government debt. Moreover (and more blatantly), they will announce their intention to start selling back to the market government bonds they’ve already bought. That’s impossible at this stage of the crisis… but a lie the markets need to be told nonetheless.
The second lie is that these asset purchases will be small and limited in scope. But from day one, the size and scope (ie, the type of debt they’re buying) has ballooned. Actions that seemed unimaginable just a few years ago are now the norm. Market players have been hypnotised into thinking this is all very normal.
The third lie is that there’s a considered time scale to all of this. In fact, it was a release from the Fed that suggested the reversal is coming sooner than many think that sent the precious metals into a spin just after Christmas. Of course there is no exit strategy and no timeline here. These guys are making up policy on the hoof. And to my mind it’s only going one way – and that is more of the same and for as long as they can get away with it.
The fourth lie they’ll tell is that they’re fighting deflation. But if that were really true, how can they also say that QE will be reversed? That would surely be to welcome deflation down the line.
No, these guys are pursuing inflationary policies and they use the four lies to send the markets the wrong way.
They have to! I mean, if the inflation indicators – gold, silver and oil – took off, then the game would be up. Their precious bonds would get crushed under their own weight of debt.
So what happens is that whenever the inflation indicators turn up, the banks come up with some rhetoric to pull them down. And if the paper markets take a turn for the worse, they throw in some easing to pull them up.
This is what’s causing the big market swings.
(with thanks to Moneyweek)
Today, I was asked what I thought about this year’s European economic outlook. It isn’t great!
One factor which I have consistently underestimated is the ability of politicians to “wheelbarrow” a tragic set of circumstances from one meeting to another without even aiming for a holistic solution. Plus, I have always been conscious of the symbiotic relationship between politicians and bankers but, like an illicit love affair, it has grown over the years. Not into a mature loving relationship but instead, it has acquired all the charming qualities of an incestuous shotgun marriage.
I have been feeling very pessimistic about the world’s banking system for years – even before the 2007/2008 crisis. HERE!
Today, the ENTIRE financial system remains in crisis with both bankers and politicians apparently reduced to the role of observer. Their well-timed occasional “good news” is both ritualistic, orchestrated and largely illusory.
The problem is most acute in Europe where all major banks are barely managing to contain gut-busting levels of very bad government bonds.
Asian banks are at risk as Japan has begun to print and we all owe them money. Plus, we been in the habit of paying for their goods with money which they’ve lent us.
As a result of the sharp decrease in world demand, Asian economic growth has slowed very sharply.
Meanwhile, the United States was becoming addicted to the easy “fix” of Quantitative Easing, but nevertheless, in spite of the supply of virtual money, many of its institutions remain on life support.
Now we have the frightening prospect of the Fed stopping its money printing and the U.S economy having to go “cold turkey”. That won’t be a pretty sight!
Because nothing has really been done post the 2008 banking system collapse, I fear that we may be soon heading for an action replay.
The so-called “stress tests” which various governments have been performing on the banks have been less than useless as an indicator of banking “health” because the entire banking industry has been dispensing the wrong information to those who dare to try and measure what they’re doing and what they’ve got.
Bankers have only ever told us what they feel we ought to hear.
We are all aware of how badly the Rating Agencies managed to mess things up prior to 2008 and guess what…………the likelihood is that they’re still doing it! It is clear that, for instance, the Eurozone is about to suffer Cardiac Arrest but the Agencies are still telling us that everything is (more-or-less) fine!
The Rating Agencies have a history:
In a landmark 1994 study of the rating agencies, the U.S Government Accountability Office (GAO) concluded that Standard & Poor’s didn’t issue a “vulnerable” rating for one of the biggest failed companies, Fidelity Banker’s Life, until SIX DAYS before the failure … and for another, Monarch Life, until 351 days AFTER the failure! Similar instances of outright neglect were true of Moody’s as well as A.M. Best .
The Enron Failure of 2001: The New York Times reported that ratings agencies saw signs of Enron’s deteriorating finances but did little to warn investors until at least five months later – long after more problems had emerged and Enron’s slide into bankruptcy had already accelerated. It wasn’t until four days before Enron filed for Chapter 11, that the major agencies first lowered their debt ratings below investment grade!
What about the U.S mortgage meltdown of 2007 and 2008? EVERYONE now agrees that triple-A ratings on mortgage-backed securities grossly overestimated the investments’ credit quality and that this played a pivotal role in the debt crisis and that the primary factor behind their inflated ratings were multiple conflicts of interest between them and the issuers.
In the United Kingdom, the collapses or near-collapses of Northern Rock, HBOS, RBS etc were also a surprise to everyone except a few impotent accountants and auditors.
Do you remember anyone commenting on the “ratings” of the companies which had been bankrupt for months or even years? Me neither.
Nearly all ratings issued by the major agencies are paid for by the issuers — in other words, by the companies that are supposedly being rated!
In addition, the ratings agencies have often earned substantial additional consulting fees to help structure the very Securities which they rate!
To add insult to injury, it’s been proved that the major ratings agencies have often revealed their ratings formulas to issuers, helping their clients to pre-manipulate their data and “adjust” reporting in order to achieve the highest rating.
During the first phase of the financial crisis (2008), and largely because of the inherent conflicts of interest, the major ratings agencies continued to feed investors disinformation. (b******t).
For example, on the day of Bear Stearns’ failure, Moody’s maintained a rating on the company of A2 — the same rating it had published from June 1995 through to June 2003.
S&P was equally generous, giving the firm an A rating until the day of failure.
And Fitch assigned Bear Stearns an A+ rating for 18 straight years all the way up until the day it imploded!
The same basic facts apply to Lehman Brothers and all the other companies that either went belly up or were acquired for pennies.
The major ratings agencies have failed time and again to provide adequate warnings on collapses in all kinds of stocks, bonds, and even entire companies.
The scariest thing today is that European banks are now on the verge of being decimated just like Lehman, Bear Stearns and other firms were back in 2008.
The world economy is slowing from one end of the globe to the other. With massive debts piling up, unemployment rates soaring and the world’s banks still HIGHLY leveraged (overborrowed), it’s only a matter of time before the entire system blows up.
Nowhere is the crisis more acute than in Europe — and nowhere are the risks so great.
The key reason is that European banks are so HUGE relative to their home economies.
The aggregated European economy is roughly equivalent to that of the USA. However, European banks have almost THREE TIMES the assets of our American cousins. Now THAT’s disproportionate power!
That makes it all but impossible for European countries to successfully bail out their banks without jeopardizing their own credit standing and crushing their citizens under the weight of massive tax increases.
Greece, Spain, Portugal, Italy and soon France, have been lined up like fairground ducks under the jackboot of austerity by tax-starved governments.
That’s why we’re seeing sovereign credit ratings fall, bank share prices decline, and policymakers scrambling from one end of the continent to the other in a desperate attempt to find some kind of workable solution!
The problem? THERE ISN’T ONE!
The perfect recipe for an epic, global financial collapse that will sweep up major banks around the world!
Last year’s predictions are HERE.
Some were right, some were nearly right whilst others were nowhere near! That’s because most forecasting is a mixture of extrapolation, conjecture, wishful-thinking and luck…………..apart, that is, political and economic divination , which also includes an unhealthy slice of blind optimism.
My interests are mainly political and economic although the list below contains a few random “fun” ones!
I have not included too much of the blindingly obvious, such as the 2013 Eurovision Song Contest in Malmö, where the United Kingdom will be in the bottom THREE and the most likely winner will be Scandinavian.
Wishful thinking has been avoided. For example I do wish that Mo Farah would stop sticking his hands on his head and doing an impression of a demented Pretzel in a vest!
Conjecture, based on past performance suggests that there will NOT be any banking reorganisation because of vested interests and political cowardice. Governments have it within their power to keep that particular pot boiling for years!
All Eurozone Crisis predictions of the last four years vastly underestimated politicians’ capacity for procrastination, ineptitude and political self-interest.
However, I do perceive that European countries with reasonably strong economies will begin to see the advantage of NOT prolonging the Euro agony and once again, striking out on their own, setting their own interest rates and returning to the Lira or Peseta!
These are my predictions:
1. Gold will skyrocket in value.
2. Brazil will finally become THE place to invest(shares and currency)….but see 41 & 42 below.
3. Germany will accelerate the sale of its Bunds, in spite of the fact that it hopes to sell about only about €250 billion Euros’ worth which is lower than in 2012.
4. As predicted last year, Silvio Berlusconi will reappear in Italian Politics – much to Frau Merkel’s chagrin.
5. Pressure will increase on Chancellor George Osborne to be replaced (It’s the ONLY way that the Coalition can move to Plan B without too much loss of face).
6. The banks will continue to rebuild their balance sheets as the value of their assets diminishes, resulting in an increase of non-bank lending. Credit Unions, peer-to-per lending, asset leasing, community finance organisations and invoice finance will all accelerate as the banking system continues its introspection.
7. United Kingdom property prices will fall by 25%.
8. Frau Merkel will be re-elected and continue as Germany’s Chancellor.
9. Italy will talk about leaving the Euro and readopting the Lira…………..and Berlusconi will be accused of blackmailing Europe.
10. People-power will win-out in Greece and it too will (finally) seriously consider leaving the Euro as its austerity programme is given a violent “thumbs down” by its people.
11. The theoretical €30 billion in French tax hikes will have a negligible effect on its tax “take”. High net worth individuals and businesses will continue the exodus which began in late 2012.
12. Greek banks will begin to totter as loan defaults by Greek borrowers (both personal and commercial) continue to accelerate.
13. The “restructuring” of Spanish banks will fail.
14. David Cameron and other members of the UK Coalition Government will continue to add 100,000 to the ” number of new jobs we have created in the Private Sector” every time they make a speech. By mid-2013, the “figure” will have swollen to over 1.5 million. Unfortunately without the associated increase in tax-take which one may be forgiven for having expected.
15. Japan printing money will result in a currency battle, primarily involving the American dollar.
16. Greek Tax authorities (in spite of all those reorganisation noises!) will still fail to collect the taxes.
17. David Cameron will realise that UKIP is a clear and present danger and will begin the fight-back by the only way possible. He will adopt their policies and reinforce that by continuing to spray copious volumes of testosterone in Brussels.
18. Mario Monti will stand for election in Italy in a last-ditch attempt to maintain the stranglehold on European politics by Goldman Sachs old boys.
19. The Euro will make its annual journey “to the brink”.
20. Protests will accelerate across Europe – into the United Kingdom….as voters wake-up to the politicians’ ineptitude, procrastination and complacency. Voting-out incompetent governments and merely replacing them with incompetent outfits of another flavour will no longer be viewed as the solution.
21. In France, Francois Hollande will continue to demonstrate why the French don’t really appreciate Presidents who are Socialist.
22. The ECB’s Mario Draghi will once again tell the world that he will do “all it takes” to keep the Euro intact…..including the ruination of millions of Euro lives.
23. Someone, somewhere will wake up to the fact that the banking system is not working and has morphed into a fat, ever-hungry cash cow which no longer executes the functions which it was designed for (to support individuals, commerce and government).
24. Youth Unemployment in Greece and Spain will approach 60%.
25. By the end of 2013,the Catalans and the Basques will decide on their self-determination.
26. There will be a massive surge in the Spanish anti-Royalist movement and the Spanish Royal family will feel “unloved” as demands are made for the abdication of King Juan-Carlos.
27.The Franco-German Euro Axis will be consigned to the poubelle of history as Frau Merkel finds herself another “favourite”.
28.There will be an exodus of high-earners from France in protest to the Socialist-style “Politics of Envy” taxes on those earning over €1 million.
29. British P.M David Cameron will continue to bang-on about “the mess that Labour left behind” – THREE years after coming to office. That will remind the electorate that in spite of the PR, the Coalition still has no idea about how to deal with the budget deficit, except to adopt the bad part of the Merkel Model.
30. Japan’s money-printing programme will drive up its inflation, to match (and exceed) that of the USA, possibly achieving “hyper” levels. Then, they’ll print some more!
31. USA: There will be no “Fiscal Cliff”. The cracks in policy will be papered over by compromise and political expediency………. as America lurches towards the next crisis.
32. In the UK, the Church of England will continue to fret about sex-related matters such as gays, gay marriage and lady bishops. Hopefully, some of them will find a bit of time for their God and congregation!
33. The winners of the X-factor and Britain’s got Talent will have no discernible…………talent. (That’s my annual, sure-fire, 24-carat banker!)
34. In Europe (as usual), neither Barroso nor Van Rompuy will say anything REMOTELY interesting or pertinent.
35. Europe will continue to TALK of fiscal and political integration………but that’s what it will remain…..TALK. Why? Because one of the by-products would have to be some form of Debt-Mutualisation which so far, remains a deal-breaker.
36. German resistance to European supervision of the banks will result in the smaller banks remaining unsupervised.
37. In Italy, Mario Monti has clearly demonstrated the usefulness of a government of Technocrats: they have pushed through economic reforms and budget cuts which a properly-elected government would have NO CHANCE of implementing. However, the honeymoon appears to be over and Italy will return to a Berlusconi-led coalition.
38. Bundeskanzlerin Merkel will strengthen her position as de facto European leader as other (weaker, male) European leaders (half of who are on their way out – including the UK administration) continue to defer to her.
39. After the German elections, Mrs Merkel’s Christian Democrats will form a new coalition with the Social Democrats.
40. Stagnation, Recession and Depression will continue in Europe. Greece will remain in depression (yes!), as will Spain and Portugal.
41. If you’re an investor, you could do worse than keep an eye on Mongolia’s mining boom which will pick up speed in 2013.
42. If you’re a gambling person, here’s an interesting “double”. Lord Patten to resign as BBC Chair . Then, invest your winnings on anything in Macau whose economy is booked to grow by about 15% in 2013.
43. The “in denial” UK Coalition Government will continue to spout meaningless statistics as the retail trade continues its slow-motion collapse and accelerating volumes of businesses go into administration and bankruptcy.
44. The Protestant Church will begin to turn more to Bible-centred Christianity – away from the airy-fairy, trendy, unleaded and flaccid Christianity of the Rowan Williams era. More “splintering”.
45. Last year I predicted a dismembering of the UK’s Coalition government but now realise that it was just wishful thinking. I underestimated how much Tory crap Nick Clegg could swallow. Last year, his capacity seemed infinite. However, for 2013, I predict that Europe will provide the catalyst for an all-out Coalition Civil War.
46. Unless the Chancellor can sell 5G, 6G and all the other “G” Futures and assuming he collects for 4G, there will be a massive government Welfare Review designed to further butcher Public Spending. ( He has no choice because of his rather stunted economic repertoire). That will finally shake the Libdems from their collective coma and fight the Tories. Otherwise…….Libdem Oblivion.
47. “Dead-tree” journalism will continue to atrophy and die with an announcement that at least one major newspaper is to go exclusively digital. (My money is on the Guardian).
48. Massive Solar storms may envelop the Earth which, according to NASA, could render the above predictions both irrelevant and obsolete. Keep an eye on www.swpc.noaa.gov
49. Andrew Mitchell MP will make a return appearance in the Cabinet after the nonsense of allowing the police to investigate themselves in what is increasingly looking like the fit-up of the year.
50. William Hague and Hillary Clinton will keep-on “condemning” the Syrian Authorities as they continue to murder with impunity. Western powers have learned that when they intervene in the Middle East – only one group ever benefits: The Construction Industry.
Mark Carney, the Governor-elect of the Bank of England is the perfect hire for this Government.
Over the last two years, it has become increasingly evident that Chancellor George Osborne and Business Secretary Vince Cable have no policy at all in respect of banking.
The Conservatives have known all along what they want and need from our banking system, whereas Vince Cable has been reduced to delivering the odd grumpy sound-bite.
It’s been nothing more than window dressing.
Because of the symbiotic relationship between politicians, retired politicians and banks, they had to hire someone who would more-or-less preserve the status quo but who was also a major international player.
Mr Carney, a Goldman Sachs-trained Investment Banker is the exceptional candidate for the role……..as long as he delivers what Chancellor Gideon expects and doesn’t overdo the Bank of England’s “independence” bit.
We can forget Banking Reform (remember “firewalls”, “good banks”, “bad banks”, “Splitting the banks”, “Too big to fail banks” and all the other buzz phrases from the last four years?)
Forget them all.
Mark Carney is the current Governor of the Bank of Canada and as such, responsible for the Canadian Banking system which is considered to be the safest in the world. However, the Canadian Banking system is dominated by five main banks and most importantly, these banks are not just retail banks but they are Holding Companies which also control activities such as credit cards, brokerage, mutual funds, insurance etc.
That is probably the model which appeals to our Chancellor and the government – and, most importantly, which will require the minimum amount of “tweaking” of the British banking system.
The Coalition government had absolutely NO INTENTION of ever reorganising our banking system and is now able to say: “Let’s wait until the new Governor is in place.”
Meanwhile, because ALL regulation will eventually land in the Bank of England’s lap, we should expect the FSA to atrophy and die – as it has been doing since inception and anyway, Lord Turner stands absolutely no chance against this guy – with the added “frisson” of Turner having also applied for the BoE Governor job.
Here’s the Chancellor’s slightly overdone sales pitch:
“Mr Carney is unique amongst the potential candidates, in combining long experience of Central Banking, huge international credibility in economics, deep expertise in financial regulation and a first-hand experience of private-sector financial institutions.”
He wasn’t the exceptional candidate. He was the only candidate.