Why can't newspapers, even the upmarket ones, employ people who can interpret economic statistics properly? Today's Telegraph has a headline "Retail sales hit 25-year low" -- but of course, they didn't. The headline represents a misinterpretation of one of the far-too-numerous survey-based reports that the media love to play up. There are lots of these in the housing markets too, and they are almost never reported sensibly.
So what does this latest shock horror report, compiled by the CBI, actually say? Here are the key paragraphs from the Telegraph report:
"The trade body's survey of 153 retailers showed that 60pc of respondents said sales in the first half of August were lower than a year ago. Only 13pc sold more goods than a year earlier.
The balance of -46 percentage points is the lowest since the survey began in July 1983 and compares with -36 in July."
All that means is that retailers are gloomier, at least by this measure, than they've been for 25 years. But the actual value of retail spending is many times higher now than it was 25 years ago. What's more, the latest official data actually showed a small increase in retail sales in July, something which seems to have escaped the reporter on this story. So it's simply wrong to say that retail sales are at a 25-year low.
The sad thing is that the CBI will not make any effort to correct this misinterpretation of its survey -- in fact, it positively revels in its ability to generate misleading, doom-filled headlines. It's all ammunition for its increasingly strident calls for an interest rate cut. Too bad the newspapers keep falling for it.
Thursday 28 August 2008
Tuesday 26 August 2008
The 2012 Olympics? Priceless
The "handover" parties across the UK on Sunday, as London replaced Beijing as the Olympic city, were sponsored by Visa. Given that the London Olympics were an impulse purchase made at an unknown (unknowable?) price, set to be paid for over a very long span of years, that seems very apt.
Friday 15 August 2008
Greenspan: he's still getting it wrong
Former Fed Chairman Alan Greenspan (formerly known as the Maestro, but probably not any longer) has been sounding off to the Wall Street Journal about the housing crash and related issues. He says the US Government's bailout plan for Fannie and Freddie is "bad": the shareholders should have been wiped out and the companies reconstituted and refloated. He might be right in principle, though the consequences of such a course of action in the febrile state of capital markets might have been difficult to control.
Greenspan also takes the opportunity to dodge any blame for the credit crunch. According to the WSJ, "Mr. Greenspan has been criticized for contributing to today's woes by keeping interest rates too low too long and by regulating too lightly. He has been aggressively defending his record -- in interviews, in op-ed pieces and in a new chapter in his recent book, included in the paperback version to be published next month. Mr. Greenspan attributes the rise in house prices to a historically unusual period in which world markets pushed interest rates down and even sophisticated investors misjudged the risks they were taking".
Only the investors misjudged the risks, eh, Alan? The Fed's behaviour in cutting interest rates every time the equity markets came under threat -- the dotcom collapse, 9/11 -- might just possibly have encouraged that behaviour. They called it the "Greenspan put", and it's probably not something the Maestro wants to see featuring prominently in his obituaries.
As for the idea that "markets pushed interest rates down", those of us who think that interest rates are the price of money might interpret their historically low levels in the first half of this decade as evidence of an excessive amount of money washing around in world markets. That's something Greenspan and pals could have done something about, but they were so busy taking credit for low US inflation (which really originated in China and India) that they took their eye off the ball. You'll have to do a lot better than this if you want to rehabilitate your reputation, Maestro.
Greenspan also takes the opportunity to dodge any blame for the credit crunch. According to the WSJ, "Mr. Greenspan has been criticized for contributing to today's woes by keeping interest rates too low too long and by regulating too lightly. He has been aggressively defending his record -- in interviews, in op-ed pieces and in a new chapter in his recent book, included in the paperback version to be published next month. Mr. Greenspan attributes the rise in house prices to a historically unusual period in which world markets pushed interest rates down and even sophisticated investors misjudged the risks they were taking".
Only the investors misjudged the risks, eh, Alan? The Fed's behaviour in cutting interest rates every time the equity markets came under threat -- the dotcom collapse, 9/11 -- might just possibly have encouraged that behaviour. They called it the "Greenspan put", and it's probably not something the Maestro wants to see featuring prominently in his obituaries.
As for the idea that "markets pushed interest rates down", those of us who think that interest rates are the price of money might interpret their historically low levels in the first half of this decade as evidence of an excessive amount of money washing around in world markets. That's something Greenspan and pals could have done something about, but they were so busy taking credit for low US inflation (which really originated in China and India) that they took their eye off the ball. You'll have to do a lot better than this if you want to rehabilitate your reputation, Maestro.
Thursday 14 August 2008
Don't do as I do, do as I say
This quote from US Secretary of State Condoleezza Rice is pretty staggering: “This is not 1968 and the invasion of Czechoslovakia, where Russia can threaten its neighbours, occupy a capital, overthrow a government and get away with it. Things have changed.” George Bush has weighed in on similar lines, saying that Russia's recent behaviour in Georgia is not acceptable "in the 21st century".
I wonder why the Russians didn't realise that the rules had changed. Maybe they saw the US invading Iraq and getting away with it. Or perhaps they saw the US invading Afghanistan and getting away with it. Or perhaps they saw the US bombing Serbia and separating off one of that country's provinces, Kosovo, and getting away with it. Or maybe they have longer memories and recall the US invading Grenada to overthrow an elected government and getting away with it.
None of this is meant to excuse the Russians for their heavy-handed approach in Georgia, but really, taking lessons in international behaviour from the Americans makes about as much sense as taking dancing lessons from Stephen Hawking.
I wonder why the Russians didn't realise that the rules had changed. Maybe they saw the US invading Iraq and getting away with it. Or perhaps they saw the US invading Afghanistan and getting away with it. Or perhaps they saw the US bombing Serbia and separating off one of that country's provinces, Kosovo, and getting away with it. Or maybe they have longer memories and recall the US invading Grenada to overthrow an elected government and getting away with it.
None of this is meant to excuse the Russians for their heavy-handed approach in Georgia, but really, taking lessons in international behaviour from the Americans makes about as much sense as taking dancing lessons from Stephen Hawking.
Friday 8 August 2008
Truth and justice, the American way
This week President George Bush spoke out strongly about China's record on human rights and religious freedoms, just before flying to Beijing to attend the Olympic Games. According to Dubya, the American people are very concerned about China's shortcomings in these areas.
Also this week, Osama bin Laden's former driver, Salim Hamdan, was sentenced to 66 months in jail after a "fair" trial at Gulag Guantanamo. The sentence dismayed the prosecution (i.e. the Bush government), which had been pressing for a 30-year stretch, especially as "time served" means that Hamdan will be eligible for release only six months from now. No need to worry, though: the Pentagon has already made it clear that Hamdan will continue to be detained as an "illegal enemy combatant".
President Hu Jintao is probably too polite to express the Chinese people's concerns over the Bush government's human rights record -- more's the pity.
Also this week, Osama bin Laden's former driver, Salim Hamdan, was sentenced to 66 months in jail after a "fair" trial at Gulag Guantanamo. The sentence dismayed the prosecution (i.e. the Bush government), which had been pressing for a 30-year stretch, especially as "time served" means that Hamdan will be eligible for release only six months from now. No need to worry, though: the Pentagon has already made it clear that Hamdan will continue to be detained as an "illegal enemy combatant".
President Hu Jintao is probably too polite to express the Chinese people's concerns over the Bush government's human rights record -- more's the pity.
Thursday 7 August 2008
Wrapit: Farepak for rich people
I'd never heard of Wrapit until the company came unpacked this week. Running wedding gift lists sounds like the kind of business that can only exist in a society where people like to think they're too busy to do anything for themselves. Cooking? Housework?? Looking after the kids??? Malgorzata can do that! Set up my own wedding list???? Next thing you'll be suggesting I rely on the taste and generosity of my friends and family.
Even in the parallel universe where something like Wrapit can exist (I believe that universe is known as "West London"), a business like this has to be run on sound financial principles. Most importantly, the money intended by customers to be used for buying gifts has to be kept separate from the company's own operating funds. This requires the business to be properly capitalised, which Wrapit almost certainly was not, and it requires it to grow only as fast as its available capital will allow. Wrapit seems to have grown rapidly and not very sensibly: why did a web-based wedding list company need six retail outlets? Once this sort of company starts using clients' money to pay its operating expenses, it becomes not much more than a Ponzi scheme, and its eventual fate is sealed.
Wrapit's management is trying to convince the media and its customers that the company's demise is all down to the credit crunch and to HSBC in particular. Given the nature of the business, if Wrapit had been properly run and well-capitalised it would have been all but recession proof. Like Farepak before it (and on a much larger scale, Northern Rock), Wrapit is a casualty of the "get rich or die tryin'" ethos of the past decade. It's unlikely to be the last.
Even in the parallel universe where something like Wrapit can exist (I believe that universe is known as "West London"), a business like this has to be run on sound financial principles. Most importantly, the money intended by customers to be used for buying gifts has to be kept separate from the company's own operating funds. This requires the business to be properly capitalised, which Wrapit almost certainly was not, and it requires it to grow only as fast as its available capital will allow. Wrapit seems to have grown rapidly and not very sensibly: why did a web-based wedding list company need six retail outlets? Once this sort of company starts using clients' money to pay its operating expenses, it becomes not much more than a Ponzi scheme, and its eventual fate is sealed.
Wrapit's management is trying to convince the media and its customers that the company's demise is all down to the credit crunch and to HSBC in particular. Given the nature of the business, if Wrapit had been properly run and well-capitalised it would have been all but recession proof. Like Farepak before it (and on a much larger scale, Northern Rock), Wrapit is a casualty of the "get rich or die tryin'" ethos of the past decade. It's unlikely to be the last.
A kriminull ideer
A criminology professor is suggesting that "variant" (i.e. wrong) spellings of common words should be accepted as correct. Professor Ken Smith of Bucks New University (no, neither had I, but it's in High Wycombe) is apparently fed up with correcting elementary spelling errors in his students' essays -- truely, ignor, things like that. He wants to be allowed to ignor, sorry, ignore them.
I've never taught in a university, but I have interviewed hundreds of newly-graduated job seekers. It's frustrating to know that a lot of them may have very limited writing or math skills even after a university education. You have to go to a lot of effort to try to identify the competent ones before you take the giant leap of hiring them. Now Prof Smith is proposing to throw his hands up entirely and leave prospective employers even more in the dark about the basic skills of the people they may be hiring. Not that he's doing anyone any favours -- Bucks New University may be cool with bad spelling, but employers won't be. Guess what, kid: you got five devalued A grades at A-level and now you've got a degree that nobody trusts.
I'm pretty sure that Bucks New U wasn't there in those paleolithic days when I was applying for university. All of these new "universities" have been funded by the government in order to make the benefits of higher education available to a much higher proportion of the UK's youth. If a lot of the teachers think like Ken Smith, it's probably a waste of public money.
I've never taught in a university, but I have interviewed hundreds of newly-graduated job seekers. It's frustrating to know that a lot of them may have very limited writing or math skills even after a university education. You have to go to a lot of effort to try to identify the competent ones before you take the giant leap of hiring them. Now Prof Smith is proposing to throw his hands up entirely and leave prospective employers even more in the dark about the basic skills of the people they may be hiring. Not that he's doing anyone any favours -- Bucks New University may be cool with bad spelling, but employers won't be. Guess what, kid: you got five devalued A grades at A-level and now you've got a degree that nobody trusts.
I'm pretty sure that Bucks New U wasn't there in those paleolithic days when I was applying for university. All of these new "universities" have been funded by the government in order to make the benefits of higher education available to a much higher proportion of the UK's youth. If a lot of the teachers think like Ken Smith, it's probably a waste of public money.
Wednesday 6 August 2008
They've lost the plot
If reports that the Government is considering some type of waiver or delay in stamp duty on house purchases are true, things at Westminster must be even more desperate than they appear. As usual Chris Dillow has written the definitive piece on this, with the perfect title: "Another terrible idea". Almost all of the national newspapers think it's a crazy notion too.
Since others have covered the ground so well, let's just briefly summarise what's wrong with the idea:
1. Stamp duty isn't the problem -- lack of mortgage finance is. So cutting stamp duty won't fix anything.
2. When Norman Lamont abolished stamp duty for several months in 1992, it didn't help.
3. The Government can't afford it (though that doesn't seem to be deterring it any more).
4. It may encourage first-time buyers into a market that has further to fall before true affordability is reached. That's foolish at best, cruel at worst.
5. Unless it's strictly confined to first-time buyers, it will provide an unnecessary boost to those who don't need help -- cash buyers or buy-to-letters.
We can only hope that all of these rumours are the result of a silly season trial balloon by the Government, and that this dummkopf idea will sink without a trace. That's not to say that stamp duty is perfect, though. The fact that the higher rates apply to the entire purchase price as you pass each tax threshold is ridiculous and distorting -- income tax doesn't work like that, and neither should stamp duty. But changing that would be a sensible and thoughtful thing to do, and right now thinking and sense seem to be in short supply on Downing Street.
Since others have covered the ground so well, let's just briefly summarise what's wrong with the idea:
1. Stamp duty isn't the problem -- lack of mortgage finance is. So cutting stamp duty won't fix anything.
2. When Norman Lamont abolished stamp duty for several months in 1992, it didn't help.
3. The Government can't afford it (though that doesn't seem to be deterring it any more).
4. It may encourage first-time buyers into a market that has further to fall before true affordability is reached. That's foolish at best, cruel at worst.
5. Unless it's strictly confined to first-time buyers, it will provide an unnecessary boost to those who don't need help -- cash buyers or buy-to-letters.
We can only hope that all of these rumours are the result of a silly season trial balloon by the Government, and that this dummkopf idea will sink without a trace. That's not to say that stamp duty is perfect, though. The fact that the higher rates apply to the entire purchase price as you pass each tax threshold is ridiculous and distorting -- income tax doesn't work like that, and neither should stamp duty. But changing that would be a sensible and thoughtful thing to do, and right now thinking and sense seem to be in short supply on Downing Street.
Monday 4 August 2008
Sun-loving criminals
The tragic death of a young Welsh couple in Antigua, apparently at the hands of a would-be robber, is leading some people to reassess their desire to visit the Caribbean. A couple has come forward to the Times with a story of a vicious rape and beating in the neighbouring island of St Lucia, and there are reports of people cancelling planned vacations in the region.
Crime in the Caribbean has always been mainly associated with Jamaica, but the rate of violent crime in other islands, including Antigua, has been rising in recent years. The locals seem to be just as scared of this as the tourists are, and place some of the blame on the policy in richer countries (mainly the US, but also the UK and Canada) of deporting convicted criminals to the land of their birth once they have served their jail time.
It's interesting to consider the morality of this. Lots of young West Indians move to North America or the UK as children. Some of them find it hard to integrate, fall into a life of crime and get sent to prison. When they are ready for release, the authorities check their passports and bundle them on a plane to wherever they were born. So: they've grown up in a place they never quite fitted into, they've been hardened up by jail time, and now they've been sent back to somewhere they barely know. You wouldn't think the chances of rehabilitation were very high, would you? These people fell into crime while they were in the US (or Canada or the UK) -- they wouldn't have been admitted as immigrants if they already had records. So while they may be West Indian citizens, they're American (or Canadian or British) criminals. Sending them back is expedient and popular with the voters, but it's manifestly unfair to the hapless recipient country.
This is not just an issue between the rich countries of the Anglosphere and the West Indies. Earlier this year, Australia "repatriated" to the UK a convicted criminal who had emigrated as a child. How do you rate his chances of becoming a functioning member of British society?
The couple who were attacked in St Lucia are urging people considering visits to the Caribbean to stay at home. That seems like an over-reaction -- but then again, you don't want to go for a restful break on the other side of the world, only to be confronted by the same guy that broke into your house in London five years ago.
Crime in the Caribbean has always been mainly associated with Jamaica, but the rate of violent crime in other islands, including Antigua, has been rising in recent years. The locals seem to be just as scared of this as the tourists are, and place some of the blame on the policy in richer countries (mainly the US, but also the UK and Canada) of deporting convicted criminals to the land of their birth once they have served their jail time.
It's interesting to consider the morality of this. Lots of young West Indians move to North America or the UK as children. Some of them find it hard to integrate, fall into a life of crime and get sent to prison. When they are ready for release, the authorities check their passports and bundle them on a plane to wherever they were born. So: they've grown up in a place they never quite fitted into, they've been hardened up by jail time, and now they've been sent back to somewhere they barely know. You wouldn't think the chances of rehabilitation were very high, would you? These people fell into crime while they were in the US (or Canada or the UK) -- they wouldn't have been admitted as immigrants if they already had records. So while they may be West Indian citizens, they're American (or Canadian or British) criminals. Sending them back is expedient and popular with the voters, but it's manifestly unfair to the hapless recipient country.
This is not just an issue between the rich countries of the Anglosphere and the West Indies. Earlier this year, Australia "repatriated" to the UK a convicted criminal who had emigrated as a child. How do you rate his chances of becoming a functioning member of British society?
The couple who were attacked in St Lucia are urging people considering visits to the Caribbean to stay at home. That seems like an over-reaction -- but then again, you don't want to go for a restful break on the other side of the world, only to be confronted by the same guy that broke into your house in London five years ago.
KP?? Are they nuts???
I can't say I am too upset over Michael Vaughan's resignation as England cricket captain. His batting has clearly suffered since he took on the job. He may have the 2005 Ashes victory on his CV, but the only team England have taken a Test series from lately is New Zealand. (And can Vaughan really take much of the credit for the Ashes? The Aussies whitewashed England not long afterwards in Australia to regain the crumbling urn. History is likely to see England's win in 2005 as Freddie Flintoff's Ashes -- or, if you're an Australian historian, as a fluke result mainly caused by Glenn McGrath's untimely ankle injury).
So few tears here for Vaughan -- but quite a bit of trepidation about the selection of Kevin Pietersen to replace him. It's not like appointing Joey Barton as captain of England, but it's not so long ago that KP was a bit of a bad boy. The selectors must be hoping he'll grow into the job, and everyone says he's matured into a real team player. Has he? Graeme Smith played a true captain's innings to win the thrd test for South Africa, but Pietersen's innings the day before wasn't exactly that of a guy auditioning for the big job. Trying (and failing) to reach his hundred by lofting the ball over a fielder placed to tempt him to do exactly that may well have cost England the game -- and triggered Vaughan's demise.
The other concern about Pietersen is that he's clearly obsessed with money. He has been gagging for the opportunity to cash in on the riches available in the IPL and has made no secret of his ambition to play there next year. What assurances have the selectors received from him about this? The last thing England need with the Ashes looming again is a captain who keeps looking wistfully at the money on offer in Bangalore and Mumbai.
So few tears here for Vaughan -- but quite a bit of trepidation about the selection of Kevin Pietersen to replace him. It's not like appointing Joey Barton as captain of England, but it's not so long ago that KP was a bit of a bad boy. The selectors must be hoping he'll grow into the job, and everyone says he's matured into a real team player. Has he? Graeme Smith played a true captain's innings to win the thrd test for South Africa, but Pietersen's innings the day before wasn't exactly that of a guy auditioning for the big job. Trying (and failing) to reach his hundred by lofting the ball over a fielder placed to tempt him to do exactly that may well have cost England the game -- and triggered Vaughan's demise.
The other concern about Pietersen is that he's clearly obsessed with money. He has been gagging for the opportunity to cash in on the riches available in the IPL and has made no secret of his ambition to play there next year. What assurances have the selectors received from him about this? The last thing England need with the Ashes looming again is a captain who keeps looking wistfully at the money on offer in Bangalore and Mumbai.
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