Has there ever been anyone so convinced of his own rectitude than Tony Blair? I mean, even Joe Stalin or Pol Pot may have had twinges of doubt or even remorse from time to time, but there's no sign of any such thing from Blair. His amazing weekend interview with Fern Britton shows he is totally unrepentant over his decision to lie to Parliament and the British public about the case for the Iraq war. He doesn't seem particularly bothered by the fact that thousands of "coalition" troops and hundreds of thousands of innocent Iraqis have died as a result.
In any case, why has Blair suddenly decided to do a TV interview on the subject; and why with Fern Britton rather than with someone with more gravitas? (Actually, the answer to that last one isn't hard to guess). He's going to face questioning on the whole issue when he goes before the Chilcot inquiry in January, but it seems that a lot of his testimony will be taken in private. Is his lust for public attention so great that he feels a compelling urge to put his side of the story in front of the public anyway? I can't see any other explanation, because his side of the story turns out to be as bad or worse than the suspicions of his fiercest critics.
Many years ago my firm hired a new boss from outside the company. On his first morning with the firm, he called all of the senior staff together and said that anyone caught trying to conceal loss-making trades would be fired. No second chances, because "if you'd do it once, you'd do it again". All those people paying Blair serious money (JPM, Zurich Insurance, the publishers of his autobiography, whoever is paying for his pointless role in the Middle East) might do well to keep that in mind.
Monday, 14 December 2009
Wednesday, 9 December 2009
The Moody's Blues
Back in the summer some folks in the UK media experienced a brief frisson of interest in Canada. For reasons that were never entirely clear, the idea got around that Canada cut public spending sharply to deal with a fiscal crisis in the early 1990s, and that this was some kind of example for the UK to follow. As I wrote at the time (on 7 July for example), this was a total crock. Canada hardly cut spending at all back then, and escaped from the fiscal mire largely thanks to low interest rates and solid growth in the US.
We haven't heard much about "the Canadian example" lately, so maybe the Tories, who seemed quite taken with it, have taken the trouble to check the facts, and realised they were being sold a bill of goods. However, as I pointed out at the time, there was one element of the Canadian experience that UK policymakers should take note of. Setting ambitious long-term goals is pointless, or even counterproductive; the key to fiscal success is to set achievable short-term goals -- no more than a year or two ahead -- and then roll them forward in successive budgets until you get to where you want to be. This worked in Canada. The decade or so that it took wasn't exactly pleasant for Canadians, but the process was reasonably pain-free and surprisingly well-accepted by the voters. Canada's AAA credit rating, lost in the 1990s, was restored a decade later.
So what has Alastair Darling given us in the much-awaited Pre-Budget Report? Well, he's sticking by the goal of reducing the budget deficit by 50% in the next four years, which is meaningless, inadequate or both, depending on who you ask, and he's going ahead with measures announced previously (VAT back to 17.5%, new higher-rate income tax bracket and so on). Apart from that and the token tax on bank bonuses, though, almost everything he's announced today won't take effect until 2011 or later.
The individual measures planned at that point are nothing out of the ordinary -- a 1% cap on public sector wage increases, strict limits on programme spending, another hike in NI contributions -- but the key thing about them is that they won't have any effect at all until after the general election. If Labour wins that election it can change its mind; if the Tories win, no doubt they'll do something altogether different. Either way, the real decisions that everyone accepts will have to be made are nowhere in sight.
Moody's made a few threatening noises about the UK's credit rating just a day before the PBR was tabled. Messrs Darling and Brown had better hope they aren't thinking too seriously about cutting it, because there's almost nothing in the PBR to deter them.
We haven't heard much about "the Canadian example" lately, so maybe the Tories, who seemed quite taken with it, have taken the trouble to check the facts, and realised they were being sold a bill of goods. However, as I pointed out at the time, there was one element of the Canadian experience that UK policymakers should take note of. Setting ambitious long-term goals is pointless, or even counterproductive; the key to fiscal success is to set achievable short-term goals -- no more than a year or two ahead -- and then roll them forward in successive budgets until you get to where you want to be. This worked in Canada. The decade or so that it took wasn't exactly pleasant for Canadians, but the process was reasonably pain-free and surprisingly well-accepted by the voters. Canada's AAA credit rating, lost in the 1990s, was restored a decade later.
So what has Alastair Darling given us in the much-awaited Pre-Budget Report? Well, he's sticking by the goal of reducing the budget deficit by 50% in the next four years, which is meaningless, inadequate or both, depending on who you ask, and he's going ahead with measures announced previously (VAT back to 17.5%, new higher-rate income tax bracket and so on). Apart from that and the token tax on bank bonuses, though, almost everything he's announced today won't take effect until 2011 or later.
The individual measures planned at that point are nothing out of the ordinary -- a 1% cap on public sector wage increases, strict limits on programme spending, another hike in NI contributions -- but the key thing about them is that they won't have any effect at all until after the general election. If Labour wins that election it can change its mind; if the Tories win, no doubt they'll do something altogether different. Either way, the real decisions that everyone accepts will have to be made are nowhere in sight.
Moody's made a few threatening noises about the UK's credit rating just a day before the PBR was tabled. Messrs Darling and Brown had better hope they aren't thinking too seriously about cutting it, because there's almost nothing in the PBR to deter them.
Tuesday, 8 December 2009
And if my granny had wings, she'd be an Airbus
So, the government's poodle, sorry, watchdog, the Committee on Climate Change, says that a third runway can be built at Heathrow, the world's worst-located major airport, without breaching the UK's carbon reduction targets....but only if (and I'm not making any of this up) aircraft become more efficient, the price of flying is sharply increased, a high-speed rail network gets built, other sectors reduce their carbon emissions by 90%, and my granny starts flying non-stop to Sydney in an all-economy configuration. (OK, I am making the last one up).
Shockingly, The Times has declared the committee's findings to be "good news" for the UK. I suppose they are, if you're one of those people (a minority, I'm guessing) who are prepared to live in the dark and go everywhere by bike just to preserve the right to keep using the developed world's least popular airport. Most of us, though, will continue to do almost anything, even flying out of the glorified bus station that is Luton airport, to avoid going anywhere near the wretched place.
Shockingly, The Times has declared the committee's findings to be "good news" for the UK. I suppose they are, if you're one of those people (a minority, I'm guessing) who are prepared to live in the dark and go everywhere by bike just to preserve the right to keep using the developed world's least popular airport. Most of us, though, will continue to do almost anything, even flying out of the glorified bus station that is Luton airport, to avoid going anywhere near the wretched place.
Monday, 7 December 2009
It wasn't me, says Gordon
Ahead of Wednesday's pre-budget report, Gordon Brown is giving us a few clues about Labour's platform for the general election. This morning he announced that the government would be able to save £3 billion a year by operating more efficiently. He also extended his "politics of envy" theme into his own backyard, condemning a "culture of excess" in the public sector and vowing to name and shame those earning salaries above £150,000.
I know Gordon isn't exactly a bag of laughs, but even he must find it difficult to make these points with a straight face, he being a man who has been in the most senior positions of government for better than a decade. I read somewhere recently that Alastair Campbell is back in the inner circle as the election approaches. If this is the best he can do, he's obviously lost it (whatever it was that he had in the first place).
I know Gordon isn't exactly a bag of laughs, but even he must find it difficult to make these points with a straight face, he being a man who has been in the most senior positions of government for better than a decade. I read somewhere recently that Alastair Campbell is back in the inner circle as the election approaches. If this is the best he can do, he's obviously lost it (whatever it was that he had in the first place).
Thursday, 3 December 2009
The Woody Allen bonus
The UK government's approach to the financial crisis has been riven with contradictions from the outset. After bailing out several of the biggest institutions, the government made it clear that it wanted a return to "normal" lending activities -- but at the same time stressed that it wanted banks to reduce their risk profiles and rebuild their balance sheets. It has talked incessantly about getting tough with the bankers, but is now terrified of the possibility that the EU, in the person of its new French economic commissioner, might actually do so.
Now the government is tying itself in knots over bonuses at one of the bailed-out (and currently 70% taxpayer-owned) banks, RBS. Reportedly, the Treasury has warned RBS not to increase bonus payments significantly beyond last year's level. In response, the RBS board has, also reportedly, threatened to quit en masse if the government (or the bank's largest shareholder and biggest creditor, as we might also call it) intervenes in its payout plans. The board supposedly believes that it needs to pay "competitive" bonuses in order to prevent a haemorrhage of staff to its competitors.
Vince Cable, a man whose powers of reasoning seem to have shrunk as the financial crisis has dragged on, wants the government to call the directors' bluff. It doesn't seem to occur to Vince that in the still-febrile atmosphere of global financial markets, investors might not react well to seeing one of the UK's biggest banks left leaderless. Still less does it occur to him that the directors might be right about the risks posed by a mass exodus.
Leaving Vince Cable aside, there are two possible arguments to be made in favour of the government muscling in on RBS's bonus policy: the populist argument, and the valid argument. Let's take them in order.
The populist argument is simple: RBS and several other UK banks are only still alive because the taxpayer put huge amounts of money into them just over a year ago. Until all that money is paid back, the bankers have no right to any bonuses at all. With the economy still on its back and unemployment rising, it's perfectly understandable that a lot of people feel this way. The problem is that it's a shortsighted approach. The more money RBS et al make, the sooner they can be sold back to the private sector, getting the taxpayers their money back (and with luck a bit extra for their trouble). If the directors are right to fear an exodus of big producers, curbing this year's bonus payouts would be against taxpayers' real interests, hard though it might be to convince them of that. There are enough signs of bankers moving from firm to firm in clusters (what the City refers to as "desk moves", i.e. your whole trading desk ups and leaves for a competitor) to suggest that this is a real risk at RBS.
Then there's the valid argument, which is based on the way the banks have returned to profit this year. Despite the government's lavish injection of funds and continuous jawboning, loans are hard to get, especially for small business. This is not entirely the fault of the banks. The departure of the Reyjavik cowboys and others left a gap in the market, but the UK banks have been very slow indeed to step into the breach. This year's profits have mainly come from "carry". Banks' funding costs have fallen sharply (checked your savings account lately??) and it's literally a no-brainer to invest in low risk assets and watch the money roll in month by month. You don't need traders with PhDs and copulas and algorithms to figure that out -- Jedward could probably manage it. This makes it awfully hard to see the banks' record trading profits as any kind of justification for big bonuses.
The government seems dimly aware of this. The City minister, Lord Myners, said today that banks should recognise that this year's return to profit owed more to the very benign trading conditions resulting from government policy than to any inherent genius within the banks themselves. The problem the government has now is that it appears to be making a scapegoat of RBS. It should have made it much clearer to all the banks (even those like HSBC and Barclays that were never directly bailed out)that a return to the old bonus free-for-all should wait for another year or two.
Woody Allen once commented that something like 90% of the key to success in show business was just showing up. The banks seem to be using more or less the same logic in setting this year's bonuses. It's not surprising that the government feels the need to step in, but it's a shame that they're not making their case more coherently.
Now the government is tying itself in knots over bonuses at one of the bailed-out (and currently 70% taxpayer-owned) banks, RBS. Reportedly, the Treasury has warned RBS not to increase bonus payments significantly beyond last year's level. In response, the RBS board has, also reportedly, threatened to quit en masse if the government (or the bank's largest shareholder and biggest creditor, as we might also call it) intervenes in its payout plans. The board supposedly believes that it needs to pay "competitive" bonuses in order to prevent a haemorrhage of staff to its competitors.
Vince Cable, a man whose powers of reasoning seem to have shrunk as the financial crisis has dragged on, wants the government to call the directors' bluff. It doesn't seem to occur to Vince that in the still-febrile atmosphere of global financial markets, investors might not react well to seeing one of the UK's biggest banks left leaderless. Still less does it occur to him that the directors might be right about the risks posed by a mass exodus.
Leaving Vince Cable aside, there are two possible arguments to be made in favour of the government muscling in on RBS's bonus policy: the populist argument, and the valid argument. Let's take them in order.
The populist argument is simple: RBS and several other UK banks are only still alive because the taxpayer put huge amounts of money into them just over a year ago. Until all that money is paid back, the bankers have no right to any bonuses at all. With the economy still on its back and unemployment rising, it's perfectly understandable that a lot of people feel this way. The problem is that it's a shortsighted approach. The more money RBS et al make, the sooner they can be sold back to the private sector, getting the taxpayers their money back (and with luck a bit extra for their trouble). If the directors are right to fear an exodus of big producers, curbing this year's bonus payouts would be against taxpayers' real interests, hard though it might be to convince them of that. There are enough signs of bankers moving from firm to firm in clusters (what the City refers to as "desk moves", i.e. your whole trading desk ups and leaves for a competitor) to suggest that this is a real risk at RBS.
Then there's the valid argument, which is based on the way the banks have returned to profit this year. Despite the government's lavish injection of funds and continuous jawboning, loans are hard to get, especially for small business. This is not entirely the fault of the banks. The departure of the Reyjavik cowboys and others left a gap in the market, but the UK banks have been very slow indeed to step into the breach. This year's profits have mainly come from "carry". Banks' funding costs have fallen sharply (checked your savings account lately??) and it's literally a no-brainer to invest in low risk assets and watch the money roll in month by month. You don't need traders with PhDs and copulas and algorithms to figure that out -- Jedward could probably manage it. This makes it awfully hard to see the banks' record trading profits as any kind of justification for big bonuses.
The government seems dimly aware of this. The City minister, Lord Myners, said today that banks should recognise that this year's return to profit owed more to the very benign trading conditions resulting from government policy than to any inherent genius within the banks themselves. The problem the government has now is that it appears to be making a scapegoat of RBS. It should have made it much clearer to all the banks (even those like HSBC and Barclays that were never directly bailed out)that a return to the old bonus free-for-all should wait for another year or two.
Woody Allen once commented that something like 90% of the key to success in show business was just showing up. The banks seem to be using more or less the same logic in setting this year's bonuses. It's not surprising that the government feels the need to step in, but it's a shame that they're not making their case more coherently.
Saturday, 28 November 2009
Franchising's fatal flaw
A couple of Decembers ago I travelled from London to Newcastle on the first day of the new east coast main line rail (ECML) franchisee, National Express. I blogged about it at the time. I was amazed that all reference to the previous franchisee, GNER, had been obliterated with paint overnight. And I was bemused by the fact that in the buffet car, one of the waitresses was turning all the cups the right way up, in line with a new corporate policy; GNER had always placed them upside down on the saucers.
As of a couple of weeks ago, National Express is no longer the ECML franchisee. It was stripped of its right to run the line because it failed to make the required payments to the government. The line is now operated, at least for the next two years, by a special-purpose public company. Its first action has been to paint out the National Express name from the trains and the stations. No word yet on the coffee cups.
So National Express, which operated no fewer than seven of the UK's 20 or so rail franchises a couple of years ago, is now down to two, and it has been told it will lose both of those by 2011. One rail industry expert, interviewed on Radio 4, opined that the franchising system may be on its last legs: who, he asked, is likely to bid for any of National Express's franchises when they are retendered, given the problems that this evidently experienced operator has run into?
I wonder. The flaw in the franchising system is so perfectly simple that, if it didn't occur to the politicians and the public servants when they concocted the whole awful mess back in the 1990s, it's unlikely to occur to them now. Ready? Virtually all of the people in the UK who were competent in any way to run a railway were working for British Rail at the time of privatisation. So there was nobody out there who could do the job cheaper or better than those who were already doing it. This remains the case when franchises change hands today: the guy who clocked off as a National Express driver on the day the ECML franchise was lost, clocked on as an employee of the new company next day, and drove the same train on the same route in accordance (or not) with the same timetable.
This simple and unavoidable fact explains much about the way that privatisation has worked in practice. Examples?
* It explains why cosmetic changes (the signage and the coffee cups again) seem to take precedence over meaningful change. It's easy to hire marketing types and graphic artists, but there are not a lot of railway engineers sitting around twiddling their thumbs waiting for your call.
* It explains why wages for drivers and others have soared since privatisation. For better or worse, the old BR was both a monopolist in supplying rail services and a monopsonist in employing railway staff and buying equipment. In the past, if you were a train driver, you worked for BR, and were paid whatever your union could negotiate for you. Now you and your union can play one franchisee against another in pursuit of higher wages.
* This applies to management too; the new CEO of the government-run east coast line is a woman who previously headed up my local commuter franchise, Thameslink, which was not exactly a byword for customer service and satisfaction. Now she's running one of the two most important long-distance lines in the UK.
* Most basically of all, it explains why so many franchises have run into trouble. There's not much they can do to differentiate themselves, stuck as they are with the same stations, people and rolling stock. So they make extravagant financial pledges in order to win the franchises, only to get into trouble as soon as things deviate from plan.
There are other problems with the way that rail privatisation was carried out in the UK -- the sweetheart deals given to the leasing companies, the pervasive regulatory power retained by the government. These were avoidable and reversible policy mistakes, though admittedly there is not much sign that anyone is in any hurry to reverse them. But the failure to recognise that there was simply not much in the way of real expertise that private sector operators could bring to the running of the railways, apart from a snappy line in colour schemes, was a fundamental error.
It would be nice to think that the franchise system, which has proved massively more expensive than BR ever was, is on its last legs. As with the 6:17 to London, though, I'll believe it when I see it.
As of a couple of weeks ago, National Express is no longer the ECML franchisee. It was stripped of its right to run the line because it failed to make the required payments to the government. The line is now operated, at least for the next two years, by a special-purpose public company. Its first action has been to paint out the National Express name from the trains and the stations. No word yet on the coffee cups.
So National Express, which operated no fewer than seven of the UK's 20 or so rail franchises a couple of years ago, is now down to two, and it has been told it will lose both of those by 2011. One rail industry expert, interviewed on Radio 4, opined that the franchising system may be on its last legs: who, he asked, is likely to bid for any of National Express's franchises when they are retendered, given the problems that this evidently experienced operator has run into?
I wonder. The flaw in the franchising system is so perfectly simple that, if it didn't occur to the politicians and the public servants when they concocted the whole awful mess back in the 1990s, it's unlikely to occur to them now. Ready? Virtually all of the people in the UK who were competent in any way to run a railway were working for British Rail at the time of privatisation. So there was nobody out there who could do the job cheaper or better than those who were already doing it. This remains the case when franchises change hands today: the guy who clocked off as a National Express driver on the day the ECML franchise was lost, clocked on as an employee of the new company next day, and drove the same train on the same route in accordance (or not) with the same timetable.
This simple and unavoidable fact explains much about the way that privatisation has worked in practice. Examples?
* It explains why cosmetic changes (the signage and the coffee cups again) seem to take precedence over meaningful change. It's easy to hire marketing types and graphic artists, but there are not a lot of railway engineers sitting around twiddling their thumbs waiting for your call.
* It explains why wages for drivers and others have soared since privatisation. For better or worse, the old BR was both a monopolist in supplying rail services and a monopsonist in employing railway staff and buying equipment. In the past, if you were a train driver, you worked for BR, and were paid whatever your union could negotiate for you. Now you and your union can play one franchisee against another in pursuit of higher wages.
* This applies to management too; the new CEO of the government-run east coast line is a woman who previously headed up my local commuter franchise, Thameslink, which was not exactly a byword for customer service and satisfaction. Now she's running one of the two most important long-distance lines in the UK.
* Most basically of all, it explains why so many franchises have run into trouble. There's not much they can do to differentiate themselves, stuck as they are with the same stations, people and rolling stock. So they make extravagant financial pledges in order to win the franchises, only to get into trouble as soon as things deviate from plan.
There are other problems with the way that rail privatisation was carried out in the UK -- the sweetheart deals given to the leasing companies, the pervasive regulatory power retained by the government. These were avoidable and reversible policy mistakes, though admittedly there is not much sign that anyone is in any hurry to reverse them. But the failure to recognise that there was simply not much in the way of real expertise that private sector operators could bring to the running of the railways, apart from a snappy line in colour schemes, was a fundamental error.
It would be nice to think that the franchise system, which has proved massively more expensive than BR ever was, is on its last legs. As with the 6:17 to London, though, I'll believe it when I see it.
Tuesday, 24 November 2009
What a good idea!
After their humiliating 9-1 hammering by Tottenham, Wigan Athletic's players have agreed to compensate the fans who travelled all the way to London to witness the debacle. About 450 people will be offered a refund of their travel costs and the price of their tickets.
The cost to the players is nugatory -- no more than £10,000 in total -- but the principle that useless people should voluntarily forfeit some of their earnings is an intriguing one. I'm not thinking only about footballers, though Messrs Berbatov and Pavlyuchenko might want to take note; there are applications in the wider world too....
* The Duke of York (Prince Andrew) in his role as "special trade envoy" has cost taxpayers a fortune. I've never heard an exporter say "we only got that deal thanks to good old Andy", so I think we should be offered a refund.
* ditto Lord Sugar in his role as "enterprise czar". Other than pissing off everyone he's met in Whitehall, what has he achieved?
*ditto ditto Tony Blair in his role as Middle East peace envoy. Truth to tell, he's probably totally useless in his ambassadorial role for Zurich Insurance and JPM as well, but at least they can afford him.
* ditto ditto ditto Alan Greenspan for almost wilfully steering the global economy onto the rocks. Now he has the chutzpah to get paid all over again for pontificating about it.
With only a modicum of effort, this could get to be a very long list, and we haven't even started on the managements of HBOS and RBS, Michael Grade at ITV, Martin Johnson of the England rugby team, Sven-Goran Eriksson in every job he's had for the past five years.....
The cost to the players is nugatory -- no more than £10,000 in total -- but the principle that useless people should voluntarily forfeit some of their earnings is an intriguing one. I'm not thinking only about footballers, though Messrs Berbatov and Pavlyuchenko might want to take note; there are applications in the wider world too....
* The Duke of York (Prince Andrew) in his role as "special trade envoy" has cost taxpayers a fortune. I've never heard an exporter say "we only got that deal thanks to good old Andy", so I think we should be offered a refund.
* ditto Lord Sugar in his role as "enterprise czar". Other than pissing off everyone he's met in Whitehall, what has he achieved?
*ditto ditto Tony Blair in his role as Middle East peace envoy. Truth to tell, he's probably totally useless in his ambassadorial role for Zurich Insurance and JPM as well, but at least they can afford him.
* ditto ditto ditto Alan Greenspan for almost wilfully steering the global economy onto the rocks. Now he has the chutzpah to get paid all over again for pontificating about it.
With only a modicum of effort, this could get to be a very long list, and we haven't even started on the managements of HBOS and RBS, Michael Grade at ITV, Martin Johnson of the England rugby team, Sven-Goran Eriksson in every job he's had for the past five years.....
Thursday, 19 November 2009
A royal waste of breath
Yesterday's Queen's Speech to Parliament is being described as both "the most nakedly political in years", and "the opening shot in a six-month election campaign". Somebody please shoot me now. If this is the Labour government's idea of a winning election manifesto, we really don't need to wait so long for a chance to vote. In fact we probably don't need to vote at all, unless, God forbid, the electorate really is as gullible as Gordon Brown et al appear to think it is.
I'm not sure which aspect of the speech is more maddening -- what's in it, or what's not. Let's just take a couple of the inclusions. There's to be a bill to curb internet piracy, a problem that seems to obsess Lord Mandelson but probably means absolutely nothing to most voters. Can this really be a priority? Then there's a bill to address the non-problem of older people having to sell their homes to pay for care, by providing free at-home care to all who request it. (When I say it's a non-problem, I don't mean that people don't have to sell their homes to pay for care. I mean that it's not a problem that they have to do so). This half-assed idea has been torn to shreds not only by the opposition, but by Labour peers. One, Lord Lipsey, believes it will increase isolation and disease among older folk who are persuaded to live at home (possibly by their greedy heirs) rather than move into care.
As for the exclusions, the absence of any legislation to deal with the MPs expenses scandal is remarkable. It has raised the eyebrows not only of the politicians but of Sir Christopher Kelly, who only just finished a very long report with all manner of recommendations for fixing the system. (Harriet Harman told the Commons today that reforms could go ahead without any new legislation. I'm sure we're all reassured by that).
The biggest exclusion of all, of course, is any semblance of costing for this ragbag of ideas. The Chancellor's pre-budget report, due later this month, is unlikely to make pleasant reading. It will be interesting to see what assumptions he makes about spending and revenues in order to meet the goal of cutting the deficit within four years, a target that is supposed to be made mandatory by another wackjob bill in the Queen's Speech. (Zeno's budget paradox: if the deficit really does fall by 50% in the next four years, and the next government announces another 50% reduction for the succeeding four years, how long will it take for the public finances to return to surplus? The answer is, of course, that it never will, which is one reason why long-term targeting of this sort should be avoided). The figures for public borrowing in October, which were published today, are not encouraging, so it would be an understatement to say that the Chancellor has no room for manouevre, even without this week's uncosted shopping list.
In the end, of course, this is all largely academic. I read somewhere that there are 33 sitting days left in the Parliamentary session, so the chances of any of the 15 bills in the Queen's Speech getting onto the statute books is pretty much nil. It seems almost cruel to have forced an 84-year old woman wearing a polar bear costume to schlep all the way down the Mall to read the speech. Maybe she was persuaded to do it in return for the promise of free at-home care in her later years. If I were you, your Maj, I wouldn't be holding my breath.
I'm not sure which aspect of the speech is more maddening -- what's in it, or what's not. Let's just take a couple of the inclusions. There's to be a bill to curb internet piracy, a problem that seems to obsess Lord Mandelson but probably means absolutely nothing to most voters. Can this really be a priority? Then there's a bill to address the non-problem of older people having to sell their homes to pay for care, by providing free at-home care to all who request it. (When I say it's a non-problem, I don't mean that people don't have to sell their homes to pay for care. I mean that it's not a problem that they have to do so). This half-assed idea has been torn to shreds not only by the opposition, but by Labour peers. One, Lord Lipsey, believes it will increase isolation and disease among older folk who are persuaded to live at home (possibly by their greedy heirs) rather than move into care.
As for the exclusions, the absence of any legislation to deal with the MPs expenses scandal is remarkable. It has raised the eyebrows not only of the politicians but of Sir Christopher Kelly, who only just finished a very long report with all manner of recommendations for fixing the system. (Harriet Harman told the Commons today that reforms could go ahead without any new legislation. I'm sure we're all reassured by that).
The biggest exclusion of all, of course, is any semblance of costing for this ragbag of ideas. The Chancellor's pre-budget report, due later this month, is unlikely to make pleasant reading. It will be interesting to see what assumptions he makes about spending and revenues in order to meet the goal of cutting the deficit within four years, a target that is supposed to be made mandatory by another wackjob bill in the Queen's Speech. (Zeno's budget paradox: if the deficit really does fall by 50% in the next four years, and the next government announces another 50% reduction for the succeeding four years, how long will it take for the public finances to return to surplus? The answer is, of course, that it never will, which is one reason why long-term targeting of this sort should be avoided). The figures for public borrowing in October, which were published today, are not encouraging, so it would be an understatement to say that the Chancellor has no room for manouevre, even without this week's uncosted shopping list.
In the end, of course, this is all largely academic. I read somewhere that there are 33 sitting days left in the Parliamentary session, so the chances of any of the 15 bills in the Queen's Speech getting onto the statute books is pretty much nil. It seems almost cruel to have forced an 84-year old woman wearing a polar bear costume to schlep all the way down the Mall to read the speech. Maybe she was persuaded to do it in return for the promise of free at-home care in her later years. If I were you, your Maj, I wouldn't be holding my breath.
Friday, 13 November 2009
The Beeb and the Babe
There's no sign of any let-up in the Murdoch empire's assault on the BBC. Today The Times leads with the story that 37 BBC executives earn more than the Prime Minister. (How many Murdoch executives earn more than the PM? None of your business...but we'll come back to that).
There's nothing new about this line of attack. In the late 1920s the highest-paid sportsman in America was Babe Ruth of the New York Yankees. (Pop quiz: what was the Babe's real name? Answer at the end of this posting). Chided by the press for making more money than the President, the Babe had a simple response: "I had a better year".
Considering the kind of year Gordon Brown has had, it's certain that everyone on The Times's list could use that defence. But that's not really the point, is it? Is there any logic at all to the Times's barely-hidden implication that people in the public sector should never earn more than the PM? On what basis is Gordon Brown the appropriate comparator when deciding how much money Alan Yentob should be paid? Or, assuming for a second that this is not just about the BBC, though for Murdoch it probably is, how much a top surgeon or the administrator of a failing hospital should get? Yentob could very easily score a job elsewhere; the surgeon has years of training and could undoubtedly make more in private medicine or by moving abroad. Does anyone seriously think that Gordon Brown could step into a better-paying job at will?
Most people's remuneration is decided by the market, something that Murdoch is generally all in favour of. Now of course, the BBC hasn't helped its own cause by overpaying some of the on-air "talent". There's nobody out there who would be willing to pay Jonathan Ross what he currently pulls down from the Beeb, as I suspect Jonathan may soon find out. Almost as certainly, there's nobody at News International not named Murdoch who's in Ross's pay bracket -- though of course, unlike the BBC, News International isn't under any pressure from the media to disclose that. But Ross and a few other high profile individuals are the exception rather than the rule, and the BBC has already called a halt to the gravy train.
This cynical and hypocritical attack on the BBC is a foretaste of the sort of thing we can expect if Murdoch succeeds in his lobbying efforts to remove the obligation on news broadcasters to be free of bias. There are distressing signs that the Tories are in the process of selling their souls to Murdoch, bartering promises of regulatory changes for his support in the next election. I wonder how much Murdoch pays Fox News's rabid on-air attack dog, Glenn Beck? It may not be too long before we see him and his "fair and balanced" views on the air here.
And the Babe's real name? George Herman Ruth.
There's nothing new about this line of attack. In the late 1920s the highest-paid sportsman in America was Babe Ruth of the New York Yankees. (Pop quiz: what was the Babe's real name? Answer at the end of this posting). Chided by the press for making more money than the President, the Babe had a simple response: "I had a better year".
Considering the kind of year Gordon Brown has had, it's certain that everyone on The Times's list could use that defence. But that's not really the point, is it? Is there any logic at all to the Times's barely-hidden implication that people in the public sector should never earn more than the PM? On what basis is Gordon Brown the appropriate comparator when deciding how much money Alan Yentob should be paid? Or, assuming for a second that this is not just about the BBC, though for Murdoch it probably is, how much a top surgeon or the administrator of a failing hospital should get? Yentob could very easily score a job elsewhere; the surgeon has years of training and could undoubtedly make more in private medicine or by moving abroad. Does anyone seriously think that Gordon Brown could step into a better-paying job at will?
Most people's remuneration is decided by the market, something that Murdoch is generally all in favour of. Now of course, the BBC hasn't helped its own cause by overpaying some of the on-air "talent". There's nobody out there who would be willing to pay Jonathan Ross what he currently pulls down from the Beeb, as I suspect Jonathan may soon find out. Almost as certainly, there's nobody at News International not named Murdoch who's in Ross's pay bracket -- though of course, unlike the BBC, News International isn't under any pressure from the media to disclose that. But Ross and a few other high profile individuals are the exception rather than the rule, and the BBC has already called a halt to the gravy train.
This cynical and hypocritical attack on the BBC is a foretaste of the sort of thing we can expect if Murdoch succeeds in his lobbying efforts to remove the obligation on news broadcasters to be free of bias. There are distressing signs that the Tories are in the process of selling their souls to Murdoch, bartering promises of regulatory changes for his support in the next election. I wonder how much Murdoch pays Fox News's rabid on-air attack dog, Glenn Beck? It may not be too long before we see him and his "fair and balanced" views on the air here.
And the Babe's real name? George Herman Ruth.
Monday, 9 November 2009
Rhymes with "trade your eyes"
Former "Poet" Laureate "Sir" Andrew Motion is in trouble with a historian, Ben Shephard, who accuses him of the most heinous of literary crimes -- something that "begins with 'p' and it isn't poetry", as Shephard puts it.
Motion's poem, "An Equal Voice", was published in the Guardian on Saturday as a tribute to war veterans. Shephard couldn't help noticing that five of the eight stanzas were almost identical to passages from his own book, "A war of nerves", which featured quotes from soldiers who had experienced shell-shock. The other three stanzas also sample Shephard's work, though to prove that Motion can so do his research. there are also a few excerpts from another writer, the WW1 poet Siegfried Sassoon.
Motion has decided that the best defence is a good offence. He claims his work is in keeping with an honourable and ancient tradition of "found poetry". Well, as my mother would have said, he found it before it was lost.
To my mind, Motion only compounds the felony by attempting to name and shame William Shakespeare for a similar offence. I used to think Motion was just a really bad poet; I hadn't realised he was deeply deluded. To misquote Muhammad Ali only slightly, "if Andrew Motion even dreamed he was like William Shakespeare, he'd have to apologise".
Motion's poem, "An Equal Voice", was published in the Guardian on Saturday as a tribute to war veterans. Shephard couldn't help noticing that five of the eight stanzas were almost identical to passages from his own book, "A war of nerves", which featured quotes from soldiers who had experienced shell-shock. The other three stanzas also sample Shephard's work, though to prove that Motion can so do his research. there are also a few excerpts from another writer, the WW1 poet Siegfried Sassoon.
Motion has decided that the best defence is a good offence. He claims his work is in keeping with an honourable and ancient tradition of "found poetry". Well, as my mother would have said, he found it before it was lost.
To my mind, Motion only compounds the felony by attempting to name and shame William Shakespeare for a similar offence. I used to think Motion was just a really bad poet; I hadn't realised he was deeply deluded. To misquote Muhammad Ali only slightly, "if Andrew Motion even dreamed he was like William Shakespeare, he'd have to apologise".
Mr Peace, meet Miss Blyton
I gave a big thumbs-up to David Peace's novel "The Damned United" when I read it last year. I just got around to seeing the film, which is an absolute masterclass in how NOT to adapt a book for the screen. Here's a review I just posted on Lovefilm:
You don't know what you're doing!
David Peace's extraordinary novel 'The Damned United' waded into the story of Brian Clough's ill-fated 44-day spell as manager of Leeds United with fists flying. Clough was portrayed as a teary, sweary, bleary boozer who hated the Leeds players as much as they hated him. It was so hard hitting that, just before the film based on the book was due for release, the Clough family sponsored a documentary of their own to tell their side of the story.
Did I just say this film was 'based on the book'? If it was, the screenplay must have been adapted by Enid Blyton. Who knows, it may well be a more accurate depiction of 'what really happened' than the book ever was, but it's not nearly as interesting or enjoyable. It's about as much fun as a floodlight failure during an Accrington Stanley Reserves game on a wet January night. Avoid the film. Read the book.
It's good to have got that off my chest. Now I'm hoping that my wife, who sat through this tedious nonsense with me, will be talking to me again by the end of the week.
You don't know what you're doing!
David Peace's extraordinary novel 'The Damned United' waded into the story of Brian Clough's ill-fated 44-day spell as manager of Leeds United with fists flying. Clough was portrayed as a teary, sweary, bleary boozer who hated the Leeds players as much as they hated him. It was so hard hitting that, just before the film based on the book was due for release, the Clough family sponsored a documentary of their own to tell their side of the story.
Did I just say this film was 'based on the book'? If it was, the screenplay must have been adapted by Enid Blyton. Who knows, it may well be a more accurate depiction of 'what really happened' than the book ever was, but it's not nearly as interesting or enjoyable. It's about as much fun as a floodlight failure during an Accrington Stanley Reserves game on a wet January night. Avoid the film. Read the book.
It's good to have got that off my chest. Now I'm hoping that my wife, who sat through this tedious nonsense with me, will be talking to me again by the end of the week.
Wednesday, 4 November 2009
It's a wonderful bank??
Can Alastair Darling make the British public love its banks again? Right now, attitudes to banks are thoroughly poisoned. Long before the credit crunch, people were angry over the endless electronic menus, the impersonal call centres replacing branches, the mind-boggling overdraft fees, product mis-selling and on and on. The credit crunch added monster bonuses, giga bailouts, falling deposit rates and vanishing credit to the litany of grievance.
It wasn't always this way. Older people may still recall the days when their local bank seemed like the Bailey Building and Loan Company in "It's a wonderful life". George Bailey was a philanthropic pillar of the community, known and loved by young and old alike, and there was a time when many people may have looked on the manager of their local branch in much the same way. Strange to say, Bailey Building and Loan wasn't actually the local bank of the fictional town of Bedford Falls. In fact, the banker was the villain of the piece, and drove George to the brink of suicide. So perhaps not so much has changed.
Back in the real world, the highly-localised US banking system portrayed in "It's a wonderful life" has been in decline ever since the Great Depression. There are still many more small banks in the US than in any other developed country, but the number is falling year by year. There are many reasons, good and bad, why banks tend to grow by consolidation. Among them:
* diversification of both assets and liabilities is a good thing. A bank whose activities are entirely confined to a small community like Bedford Falls is unlikely to find things easy over the course of a business cycle. Assume, for instance, that Bedford Falls is an agricultural town. When crops are good, all the clients will be cash rich. The bank will be awash in deposits and struggling to find suitable loans. In leaner years, deposits will fall and the bank may have trouble providing the loans that its clients suddenly need. In a really bad year, the loans will go bad and the bank will struggle to remain solvent. A reasonable level of diversification, geographical or across industries, can help to mitigate those problems.
* as people became much more mobile over the course of the last century, they expected to be able to take their bank with them as they moved around. Local banks could try to deal with this demand by setting up agency arrangements, but this was quite literally a mediaeval approach, and a very cumbersome one at that. At some point it became much simpler for banks to merge.
* there are overheads that have to be met whether you have one branch or a hundred or a thousand. Auditors, lawyers, marketing and so on are much more onerous expenses for a small bank than for a large one.
* as a particular sub-set of the previous point, back-office automation is both hugely expensive and massively scaleable. When I was working for one of the "Big Five" in Canada, it was generally accepted that each bank had a back-office system that was capable of handling the daily clearing, monthly payrolls and everything else for the entire financial system. This point was fully proven when several Canadian banks merged their back office and programming systems in the late 1990s in order to cut costs. Matching the electronic services that a large bank can perform on behalf of its customers would be prohibitively expensive for a small bank.
In the UK the number of clearing banks has been falling for decades (anyone remember National Provincial -- itself the result of a merger -- or Martins Bank?), but until recently the building societies provided a reasonable alternative. Then along came the Decade of Greed, and almost all of the building societies demutualised, often under pressure from carpetbaggers. In no time flat they were either voluntarily taken over by the banks (C and G, Abbey), forced into mergers with banks after getting themselves into trouble (Bradford and Bingley) or -- the the case of Northern Rock -- driven to the brink of failure. The dominance of banking services by the clearing banks was reaching uncompetitive levels even before the government overrode competition laws in 2008 to permit the takeover of HBOS by Lloyds, a move that has proved near disastrous for the government and Lloyds alike.
All of which is a lengthy preamble to suggesting that Alastair Darling's plan to break up those banks that have received the most state aid (RBS, Lloyds and Northern Rock) may be no more than spitting into the wind. Spinning the old Williams and Glyns Bank out of RBS, or TSB out of Lloyds, as the government (prodded by the EU) now proposes, will only add marginally to the amount of retail banking competition in the UK. In fact, it may not even do that. There are already suggestions that Santander, not exactly a minnow, may seek to add Williams and Glyns to its own burgeoning empire, alongside Abbey and Bradford and Bingley, erstwhile real competitors whose venerable names will disappear at the start of 2010. Even if W & G or TSB were minded to stay independent, could they afford the computer systems that would be needed to compete with the larger firms, or would they continue to use the systems of their former parent? And if by chance they were successful, how long would it be before the initial buyers decided to cash in and sell to a bigger firm at a huge profit, prompting a public outcry over foregone profits for the taxpayer?
Bank of England Governor Mervyn King declared a couple of weeks ago that there was a strong case for breaking up the banks. He was rounded on by the Government for daring to say so, even though Darling et al must have known by that time that they were about to be forced by the EU to do precisely that. King hasn't been heard from yet on the government's specific plans, but it's a good bet that he thinks they aren't radical enough. But even if they were, it's unlikely that Sir Fred Goodwin and his ilk will emerge as the George Baileys of the modern age.
It wasn't always this way. Older people may still recall the days when their local bank seemed like the Bailey Building and Loan Company in "It's a wonderful life". George Bailey was a philanthropic pillar of the community, known and loved by young and old alike, and there was a time when many people may have looked on the manager of their local branch in much the same way. Strange to say, Bailey Building and Loan wasn't actually the local bank of the fictional town of Bedford Falls. In fact, the banker was the villain of the piece, and drove George to the brink of suicide. So perhaps not so much has changed.
Back in the real world, the highly-localised US banking system portrayed in "It's a wonderful life" has been in decline ever since the Great Depression. There are still many more small banks in the US than in any other developed country, but the number is falling year by year. There are many reasons, good and bad, why banks tend to grow by consolidation. Among them:
* diversification of both assets and liabilities is a good thing. A bank whose activities are entirely confined to a small community like Bedford Falls is unlikely to find things easy over the course of a business cycle. Assume, for instance, that Bedford Falls is an agricultural town. When crops are good, all the clients will be cash rich. The bank will be awash in deposits and struggling to find suitable loans. In leaner years, deposits will fall and the bank may have trouble providing the loans that its clients suddenly need. In a really bad year, the loans will go bad and the bank will struggle to remain solvent. A reasonable level of diversification, geographical or across industries, can help to mitigate those problems.
* as people became much more mobile over the course of the last century, they expected to be able to take their bank with them as they moved around. Local banks could try to deal with this demand by setting up agency arrangements, but this was quite literally a mediaeval approach, and a very cumbersome one at that. At some point it became much simpler for banks to merge.
* there are overheads that have to be met whether you have one branch or a hundred or a thousand. Auditors, lawyers, marketing and so on are much more onerous expenses for a small bank than for a large one.
* as a particular sub-set of the previous point, back-office automation is both hugely expensive and massively scaleable. When I was working for one of the "Big Five" in Canada, it was generally accepted that each bank had a back-office system that was capable of handling the daily clearing, monthly payrolls and everything else for the entire financial system. This point was fully proven when several Canadian banks merged their back office and programming systems in the late 1990s in order to cut costs. Matching the electronic services that a large bank can perform on behalf of its customers would be prohibitively expensive for a small bank.
In the UK the number of clearing banks has been falling for decades (anyone remember National Provincial -- itself the result of a merger -- or Martins Bank?), but until recently the building societies provided a reasonable alternative. Then along came the Decade of Greed, and almost all of the building societies demutualised, often under pressure from carpetbaggers. In no time flat they were either voluntarily taken over by the banks (C and G, Abbey), forced into mergers with banks after getting themselves into trouble (Bradford and Bingley) or -- the the case of Northern Rock -- driven to the brink of failure. The dominance of banking services by the clearing banks was reaching uncompetitive levels even before the government overrode competition laws in 2008 to permit the takeover of HBOS by Lloyds, a move that has proved near disastrous for the government and Lloyds alike.
All of which is a lengthy preamble to suggesting that Alastair Darling's plan to break up those banks that have received the most state aid (RBS, Lloyds and Northern Rock) may be no more than spitting into the wind. Spinning the old Williams and Glyns Bank out of RBS, or TSB out of Lloyds, as the government (prodded by the EU) now proposes, will only add marginally to the amount of retail banking competition in the UK. In fact, it may not even do that. There are already suggestions that Santander, not exactly a minnow, may seek to add Williams and Glyns to its own burgeoning empire, alongside Abbey and Bradford and Bingley, erstwhile real competitors whose venerable names will disappear at the start of 2010. Even if W & G or TSB were minded to stay independent, could they afford the computer systems that would be needed to compete with the larger firms, or would they continue to use the systems of their former parent? And if by chance they were successful, how long would it be before the initial buyers decided to cash in and sell to a bigger firm at a huge profit, prompting a public outcry over foregone profits for the taxpayer?
Bank of England Governor Mervyn King declared a couple of weeks ago that there was a strong case for breaking up the banks. He was rounded on by the Government for daring to say so, even though Darling et al must have known by that time that they were about to be forced by the EU to do precisely that. King hasn't been heard from yet on the government's specific plans, but it's a good bet that he thinks they aren't radical enough. But even if they were, it's unlikely that Sir Fred Goodwin and his ilk will emerge as the George Baileys of the modern age.
Wednesday, 28 October 2009
Which "real world" is that?
MPs are already up in arms about proposals to get their piggy little snouts out of the expenses trough. Apparently there will be strict restrictions on taxpayers' financing of MPs' second homes and a ban on MPs hiring family members at public expense. Here's one old buffer's reaction, from the BBC website:
Conservative MP Roger Gale said his wife Suzy has worked for him for 27 years and does "a very good, very hard, very long job", 60 hours a week, and was highly qualified. He said the reported proposals were "not realistic".
"I've heard one comment, which I think is absolutely ludicrous, to the effect that apparently somebody living an hour's train ride from London will not be allowed to have a base in London," he said.
"I just don't believe that Kelly lives in the real world, I don't think he knows what kind of hours we work or what kind of job we do."
No, Rog, you're the one who's not living in the real world. Those thousands of taxpayers who take trains into London at unearthly hours of the morning all year round and frequently come home well past dark are unlikely to sympathise with people whose working day starts around mid-morning and who get almost half the year off. Trains on the principal line through my town, which is less than 30 minutes from London, run 24 hours a day. That didn't stop our local MP, whose family home is in another equally convenient commuter town less than 20 miles away, from claiming taxpayer money to purchase a second home in the constituency -- which she promptly rented out to her daughter. Even if we weren't facing a period of restraint on public spending, that would be a serious piss-take. It has to stop.
Anyway, if either Roger Gale or my local MP wants to have a second home, there's nothing to stop them. It's just that, like their constituents, they'll have to pay for it with their own money.
Conservative MP Roger Gale said his wife Suzy has worked for him for 27 years and does "a very good, very hard, very long job", 60 hours a week, and was highly qualified. He said the reported proposals were "not realistic".
"I've heard one comment, which I think is absolutely ludicrous, to the effect that apparently somebody living an hour's train ride from London will not be allowed to have a base in London," he said.
"I just don't believe that Kelly lives in the real world, I don't think he knows what kind of hours we work or what kind of job we do."
No, Rog, you're the one who's not living in the real world. Those thousands of taxpayers who take trains into London at unearthly hours of the morning all year round and frequently come home well past dark are unlikely to sympathise with people whose working day starts around mid-morning and who get almost half the year off. Trains on the principal line through my town, which is less than 30 minutes from London, run 24 hours a day. That didn't stop our local MP, whose family home is in another equally convenient commuter town less than 20 miles away, from claiming taxpayer money to purchase a second home in the constituency -- which she promptly rented out to her daughter. Even if we weren't facing a period of restraint on public spending, that would be a serious piss-take. It has to stop.
Anyway, if either Roger Gale or my local MP wants to have a second home, there's nothing to stop them. It's just that, like their constituents, they'll have to pay for it with their own money.
Tuesday, 27 October 2009
The BNP are revolting!
I didn't watch all of the Question Time programme with Nick Griffin when it was first shown last week. Missing it was a no brainer: it clashed with a new episode of Curb your Enthusiasm, which I'd guess is not on Griffin's Sky+ recording list. However, I've seen it since, and I thought Griffin came out of it pretty badly, though arguably rather better than Jack Straw.
He could have come out of it a lot worse, though. It was a mistake for the BBC to confine the questions to race and immigration. Those are Griffin's territory, and they're also hot topics for a lot of potentially disaffected Labour voters. It would have been much better if the questions had covered other issues -- say, bank bonuses, the Royal Mail strike and global warming. Putting questions to Griffin on those topics would have revealed that he sees them through the prism of his awful racial views as well. (I'm guessing here, but I'd assume he thinks that the bankers are all Jews, the Royal Mail strikers are worried about losing their jobs to immigrants, and global warming is caused by flatulent foreigners or something of the sort). Exposing his lack of insight into the important topics of the day would have done much more to destroy his appeal than allowing him to spout nonsense about aboriginals or the ultra-leftist bias of the BBC.
Griffin is planning to complain about the way he was treated by the BBC, but at the same time he's claiming that the show led to a surge in membership enquiries for the BNP. He needs to watch his back, though. A splinter group within the BNP, the reassuringly-named Stormfront, thinks he made the party look silly. According to their spokesnazi, "the intelligent ones in the party want Griffin out".
The intelligent ones? What, both of them?
He could have come out of it a lot worse, though. It was a mistake for the BBC to confine the questions to race and immigration. Those are Griffin's territory, and they're also hot topics for a lot of potentially disaffected Labour voters. It would have been much better if the questions had covered other issues -- say, bank bonuses, the Royal Mail strike and global warming. Putting questions to Griffin on those topics would have revealed that he sees them through the prism of his awful racial views as well. (I'm guessing here, but I'd assume he thinks that the bankers are all Jews, the Royal Mail strikers are worried about losing their jobs to immigrants, and global warming is caused by flatulent foreigners or something of the sort). Exposing his lack of insight into the important topics of the day would have done much more to destroy his appeal than allowing him to spout nonsense about aboriginals or the ultra-leftist bias of the BBC.
Griffin is planning to complain about the way he was treated by the BBC, but at the same time he's claiming that the show led to a surge in membership enquiries for the BNP. He needs to watch his back, though. A splinter group within the BNP, the reassuringly-named Stormfront, thinks he made the party look silly. According to their spokesnazi, "the intelligent ones in the party want Griffin out".
The intelligent ones? What, both of them?
Wednesday, 21 October 2009
King to Brown: you're deluded
Hot on the heels of the FSA's none-too-soon plan to ban self-certified mortgages, Bank of England Governor Mervyn King has demonstrated that he too is determined to learn the lessons of the financial crisis. His speech in Edinburgh last evening to "Scottish business leaders" (presumably excluding Sir Fred Goodwin) was hard hitting to the point of being downright hostile. The whole thing is worth reading but here are a few key quotes:
It is hard to see how the existence of institutions that are “too important to fail” is consistent with their being in the private sector. Encouraging banks to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don’t, distorts the allocation of resources and management of risk.
When bank failures impose costs on the rest of the economy, it is reasonable to insist that banks themselves purchase a sufficient degree of insurance in the form of a large capital cushion available automatically before insolvency.
Anyone who proposed giving government guarantees to retail depositors and other creditors, and then suggested that such funding could be used to finance highly risky and speculative activities, would be thought rather unworldly. But that is where we now are.
These are not new themes for the Governor. It's been clear for some time that he believes that some UK banks are now too big for the economy to support, and that he sees no reason why government guarantees should stretch beyond what he calls "utility banking" to cover the banks' riskier and more speculative activities.
So both the Bank of England and the FSA "get it", but it seems as if Gordon Brown doesn't. At PMQs today he outright dismissed the Governor's advice. Acoording to The Man Who Saved The World, King is misdiagnosing the problem. In Brown's view, Lehman, which was an investment bank, went broke, but so did Northern Rock, which was a retail bank; ergo, the problem has nothing to do with the distinction between "utility" banking and investment banking.
The problem with this is that Northern Rock wasn't really a retail bank. Sure, its main assets were retail in nature: mortgages, mostly. But it was rubbish at the other side of retail business, the gathering of deposits. Because of that, the only way it could pursue its hyper aggressive growth strategy was to turn to wholesale funding markets and structured financial products, provided by Lehman et al. The Rock needed Lehman, and the Lehman needed the Rock: they were part and parcel of the same problem.
According to Brown, what's needed is better regulation. Seems as if King may have guessed that the PM would say that, though. Here's another excerpt from last night's speech:
The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion.
You'd love to be in the room if King says that to Brown next time they meet face to face. But maybe King's not too worried. His likely next boss, Tory Shadow Chancellor George Osborne, has already said he agrees with most of what King had to say last night. If King saw this as an audition, I'd say it went quite well.
It is hard to see how the existence of institutions that are “too important to fail” is consistent with their being in the private sector. Encouraging banks to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don’t, distorts the allocation of resources and management of risk.
When bank failures impose costs on the rest of the economy, it is reasonable to insist that banks themselves purchase a sufficient degree of insurance in the form of a large capital cushion available automatically before insolvency.
Anyone who proposed giving government guarantees to retail depositors and other creditors, and then suggested that such funding could be used to finance highly risky and speculative activities, would be thought rather unworldly. But that is where we now are.
These are not new themes for the Governor. It's been clear for some time that he believes that some UK banks are now too big for the economy to support, and that he sees no reason why government guarantees should stretch beyond what he calls "utility banking" to cover the banks' riskier and more speculative activities.
So both the Bank of England and the FSA "get it", but it seems as if Gordon Brown doesn't. At PMQs today he outright dismissed the Governor's advice. Acoording to The Man Who Saved The World, King is misdiagnosing the problem. In Brown's view, Lehman, which was an investment bank, went broke, but so did Northern Rock, which was a retail bank; ergo, the problem has nothing to do with the distinction between "utility" banking and investment banking.
The problem with this is that Northern Rock wasn't really a retail bank. Sure, its main assets were retail in nature: mortgages, mostly. But it was rubbish at the other side of retail business, the gathering of deposits. Because of that, the only way it could pursue its hyper aggressive growth strategy was to turn to wholesale funding markets and structured financial products, provided by Lehman et al. The Rock needed Lehman, and the Lehman needed the Rock: they were part and parcel of the same problem.
According to Brown, what's needed is better regulation. Seems as if King may have guessed that the PM would say that, though. Here's another excerpt from last night's speech:
The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion.
You'd love to be in the room if King says that to Brown next time they meet face to face. But maybe King's not too worried. His likely next boss, Tory Shadow Chancellor George Osborne, has already said he agrees with most of what King had to say last night. If King saw this as an audition, I'd say it went quite well.
Monday, 19 October 2009
No more Ninjas
The UK mortgage market never quite reached the same level of insanity as that of the US, where "ninja" mortgages (no income, no job or assets) were a major contributor to the financial crisis. We got pretty close, though, with so-called "self certified" mortgages, in which the lender took the borrower's word for how much they earned and how big a loan they could afford to service. Amazing to relate, some borrowers lied about their circumstances, and some of these idiotic loans went bad.
The FSA seems to have learned a lesson from this, and is planning to ban self certified mortgages, although bizarrely, it's giving the industry until mid-January to respond to the proposal. You wouldn't think there'd be much to discuss, but this quote from the Council of Mortgage Lenders suggests you'd be wrong:
"It is ironic that at the same time as politicians are seeking to encourage lenders to increase their flow of mortgage lending to consumers, they are also keen to take steps to address the perception of 'irresponsible lending'," the CML said.
Two things come to mind here. First, like Alanis Morissette, the CML has no idea what the word "ironic" means. Second, it's hoping that politicians and taxpayers have very short memories.
I heard someone from a mortgage brokerage on the radio just now commenting on the proposals. She warned that any new credit checks that were required as a result of the FSA's stance would inevitably add to the cost of borrowing. That's in contrast, of course, to the costs of irresponsible lending, which can, as we know, simply be dumped on the taxpayer.
Forget the alleged return of the bonus culture -- at least that will generate some chunky tax revenues. It's the possible revival of the bad old lending practices of mid-decade that the Government should really be worrying about.
The FSA seems to have learned a lesson from this, and is planning to ban self certified mortgages, although bizarrely, it's giving the industry until mid-January to respond to the proposal. You wouldn't think there'd be much to discuss, but this quote from the Council of Mortgage Lenders suggests you'd be wrong:
"It is ironic that at the same time as politicians are seeking to encourage lenders to increase their flow of mortgage lending to consumers, they are also keen to take steps to address the perception of 'irresponsible lending'," the CML said.
Two things come to mind here. First, like Alanis Morissette, the CML has no idea what the word "ironic" means. Second, it's hoping that politicians and taxpayers have very short memories.
I heard someone from a mortgage brokerage on the radio just now commenting on the proposals. She warned that any new credit checks that were required as a result of the FSA's stance would inevitably add to the cost of borrowing. That's in contrast, of course, to the costs of irresponsible lending, which can, as we know, simply be dumped on the taxpayer.
Forget the alleged return of the bonus culture -- at least that will generate some chunky tax revenues. It's the possible revival of the bad old lending practices of mid-decade that the Government should really be worrying about.
Friday, 16 October 2009
He's right about the "moron" part
There's a very dispiriting letter in today's Times. It's only two sentences long:
Sir, The term “fair trade” is an oxymoron (letter, Oct 14). Trade by its very nature can never, ever be fair.
Don't hold back, sir. Tell us what you really think.
In the two ancient dictionaries that I have at my disposal, trade is defined (inter alia) as "the business of buying and selling or bartering commodities", and "the business of buying or selling for money".
Is The Times's correspondent really asserting that every transaction that he or anyone else has ever carried out has been unfair? That when he bought a stamp in order to mail his letter, either he or the Royal Mail was ripped off? That when I bought The Times today, either Rupert Murdoch or I was a loser? (Might be a bit closer with that one, come to think of it!) If so, he's denigrating one of the fundamental characteristics of every human society since Adam was a pup. Unless you build your own house, grow your own food, make your own clothes, deliver your own children and so on, you will always have to "trade" with others.
It's certainly true that trades can be unequal, because of an imbalance of market power (up to and including monopoly) or rigging of trading conditions (through cartels and such). A large part of economic theory is devoted to these imperfections in trade, and a large part of domestic economic regulation and international trade negotiation is devoted to minimising their impact. But to suggest that all trade is by nature unfair -- and, I may say, for The Times to publish a latter making such an asseveration (sorry; those two dictionaries again) -- is quite extraordinary.
Somehow, though, it doesn't surprise me that the author of the letter appears to be a Yorkshireman.
Sir, The term “fair trade” is an oxymoron (letter, Oct 14). Trade by its very nature can never, ever be fair.
Don't hold back, sir. Tell us what you really think.
In the two ancient dictionaries that I have at my disposal, trade is defined (inter alia) as "the business of buying and selling or bartering commodities", and "the business of buying or selling for money".
Is The Times's correspondent really asserting that every transaction that he or anyone else has ever carried out has been unfair? That when he bought a stamp in order to mail his letter, either he or the Royal Mail was ripped off? That when I bought The Times today, either Rupert Murdoch or I was a loser? (Might be a bit closer with that one, come to think of it!) If so, he's denigrating one of the fundamental characteristics of every human society since Adam was a pup. Unless you build your own house, grow your own food, make your own clothes, deliver your own children and so on, you will always have to "trade" with others.
It's certainly true that trades can be unequal, because of an imbalance of market power (up to and including monopoly) or rigging of trading conditions (through cartels and such). A large part of economic theory is devoted to these imperfections in trade, and a large part of domestic economic regulation and international trade negotiation is devoted to minimising their impact. But to suggest that all trade is by nature unfair -- and, I may say, for The Times to publish a latter making such an asseveration (sorry; those two dictionaries again) -- is quite extraordinary.
Somehow, though, it doesn't surprise me that the author of the letter appears to be a Yorkshireman.
Tuesday, 13 October 2009
Left right left
Yesterday we had Gordon Brown announcing a mini-Thatcherite plan to flog off state assets. Today I get a love-letter from my Tory MP, mauling the government's plans to replace local GP practices with "polyclinics". I quote (selectively but without bias): "The Government has been blinded by the private sector"....."taking back control from GPs and shifting contracts to private providers under preferential terms". This could be straight out of Socialist Worker (not that there's anything wrong with that).
Confused? Come election time, you will be.
Confused? Come election time, you will be.
Monday, 12 October 2009
Selling the furniture to buy gin
Gordon Brown has announced that the Government will seek to alleviate the financial problems that he usually denies it has by selling off state assets. £3 billion is to be raised over the next couple of years by selling the Tote, the Dartford Crossing, the Channel Tunnel rail link and some other odds and sods.
The Tories are supportive but critical; the Lib Dems are dismissive -- Vince Cable wins the award for best comment by referring to the plan as "this car boot sale" -- and the press, as ever, are just confused. Stephanie Flanders, the BBC economics correspondent, is typical, describing the asset disposal as a measure to cut the budget deficit. NO IT BLEEDING ISN'T! It's an attempt to reduce the borrowing requirement in the near term by flogging off assets that may have considerable long-term value. It may actually increase the deficit.
Take the Tote, for example. It makes money -- even the Government can't figure out a way to lose money catering to the British public's gambling obsession. Once it's sold, the Government won't receive any of the profits. Even if the proceeds of the sale are used to pay down debt, the interest savings are likely to be smaller than the foregone profits, so the net result is a higher deficit. (Chris Dillow has looked at the math for the Tote sale in more detail here).
The same very likely goes for the Dartford Crossing and maybe even the Channel Tunnel link -- indeed, if it isn't true, the assets are probably unsellable. And it's not hard to imagine how the access charges for them will shoot up once they're in the hands of Ferrovial or some faceless private equity fund. (Here's a thought: the charge for cars on the Second Severn Crossing is now over £5, 24 hours a day, compared to £1.50 on the Dartford Crossing, with no charges at night. Plenty of scope there, I'd say).
Then of course there's the question of whether this is the right time to sell these assets if you want to maximise the returns to the taxpayers. Brown's previous disastrous exploits in flogging off the UK's gold reserves are being cited gleefully in some quarters. More pertinently, the problems BAA has experienced in trying to find a buyer for Gatwick Airport are a good indication that the market for assets of this type may not be strong at the moment.
I'm not here to suggest that there's any good reason for the state to own a betting company, but flogging it off right now is a damned poor substitute for a proper fiscal plan. I'm much less sure about selling bridges and railways -- the taxpayer has taken all the financing and completion risk in these projects, and may now see them pass into private hands just so that a desperate government can do some pre-election window dressing.
The Tories are supportive but critical; the Lib Dems are dismissive -- Vince Cable wins the award for best comment by referring to the plan as "this car boot sale" -- and the press, as ever, are just confused. Stephanie Flanders, the BBC economics correspondent, is typical, describing the asset disposal as a measure to cut the budget deficit. NO IT BLEEDING ISN'T! It's an attempt to reduce the borrowing requirement in the near term by flogging off assets that may have considerable long-term value. It may actually increase the deficit.
Take the Tote, for example. It makes money -- even the Government can't figure out a way to lose money catering to the British public's gambling obsession. Once it's sold, the Government won't receive any of the profits. Even if the proceeds of the sale are used to pay down debt, the interest savings are likely to be smaller than the foregone profits, so the net result is a higher deficit. (Chris Dillow has looked at the math for the Tote sale in more detail here).
The same very likely goes for the Dartford Crossing and maybe even the Channel Tunnel link -- indeed, if it isn't true, the assets are probably unsellable. And it's not hard to imagine how the access charges for them will shoot up once they're in the hands of Ferrovial or some faceless private equity fund. (Here's a thought: the charge for cars on the Second Severn Crossing is now over £5, 24 hours a day, compared to £1.50 on the Dartford Crossing, with no charges at night. Plenty of scope there, I'd say).
Then of course there's the question of whether this is the right time to sell these assets if you want to maximise the returns to the taxpayers. Brown's previous disastrous exploits in flogging off the UK's gold reserves are being cited gleefully in some quarters. More pertinently, the problems BAA has experienced in trying to find a buyer for Gatwick Airport are a good indication that the market for assets of this type may not be strong at the moment.
I'm not here to suggest that there's any good reason for the state to own a betting company, but flogging it off right now is a damned poor substitute for a proper fiscal plan. I'm much less sure about selling bridges and railways -- the taxpayer has taken all the financing and completion risk in these projects, and may now see them pass into private hands just so that a desperate government can do some pre-election window dressing.
Tuesday, 6 October 2009
Tories start to flesh it out
After the pieties of the LibDem conference and the vacuities of Labour, we're finally getting a bit of substance from the Tories. It's good that at least one of the parties is willing to spell out what might be needed to get the UK's fiscal situation back under control. Unfortunately, however, not all of their ideas have a whole lot of merit.
The media were dominated today by the suggestion that the state pension age for men could rise by one year in 2016, to 66. This step was already in the pipeline under Labour, but for 2026; the Tories argue that the public finances demand that it be done much sooner. (Disclosure: this doesn't affect me either way. I'll be 65 before 2016, and anyway the value of my state pension will be determined more by the nice, kind people in Ottawa than by anyone in Whitehall).
It's amazing to listen to the furore this has stirred up. BBC Radio 2's lunchtime talk show host (mercifully not Jeremy Vine on this occasion) challenged Tory social affairs spokesman Theresa May to explain how the party would dare to impose such a change at such short notice. The line went dead and we didn't get to hear her answer. However, while I can't cite chapter and verse here, I'm willing to bet that the same show has run several items on the iniquity of compulsory retirement within the past few months! I'm not taking sides, just wondering about the lack of consistency. I will say, however, that in my own experience the people who want to work past 65 mostly have cushy office jobs. You don't see many miners or assembly line workers demanding the right to keep working.
The same theme about the supposedly short notice of the change was echoed by a gent on the TV a little while later. He said the change was unfair because people set their financial plans for retirement many years in advance. Maybe I'm missing something, but I'd have thought that was only a problem if the goverment was planning to force people to retire earlier. Anyway, most of what I've read in the past suggests that the big problem we have is not people who plan their retirement finances way in advance, but people who make no provision for retirement at all.
For me, the Tories are on the right lines on pensions. The rest of their ideas affecting the elderly have a lot less merit. Despite the strain on the public finances, the Tories apparently feel they have to honour their previous pledge to eliminate inheritance tax on estates of less than £1 million. As I never tire of saying, I don't find it hard to choose between paying taxes now and paying taxes when I'm dead. The Tories are plain wrong on this issue, though from a party built on inherited wealth I suppose we can't expect anything else.
Then there's the plan to provide free residential care to anyone willing to make a one-off payment of £8000 to the state when they retire. This would remove the supposed iniquity of people having to sell their homes in order to pay for their care, though as I've noted before, this is not iniquitous for the elderly, only for their heirs, and I'm not sure they should be the ones dictating public policy on this. In any event, the Tory policy is already showing signs of being half-baked. The party has already had to "clarify" that the one-off payment will only entitle you to a voucher for "average" residential home costs. Damn! There goes my plan to take over the entire top floor at the Lanesborough and send the bill to David Cameron.
So far then: one good idea; one bad one; one not fully thought out. Still, at least they're trying.
The media were dominated today by the suggestion that the state pension age for men could rise by one year in 2016, to 66. This step was already in the pipeline under Labour, but for 2026; the Tories argue that the public finances demand that it be done much sooner. (Disclosure: this doesn't affect me either way. I'll be 65 before 2016, and anyway the value of my state pension will be determined more by the nice, kind people in Ottawa than by anyone in Whitehall).
It's amazing to listen to the furore this has stirred up. BBC Radio 2's lunchtime talk show host (mercifully not Jeremy Vine on this occasion) challenged Tory social affairs spokesman Theresa May to explain how the party would dare to impose such a change at such short notice. The line went dead and we didn't get to hear her answer. However, while I can't cite chapter and verse here, I'm willing to bet that the same show has run several items on the iniquity of compulsory retirement within the past few months! I'm not taking sides, just wondering about the lack of consistency. I will say, however, that in my own experience the people who want to work past 65 mostly have cushy office jobs. You don't see many miners or assembly line workers demanding the right to keep working.
The same theme about the supposedly short notice of the change was echoed by a gent on the TV a little while later. He said the change was unfair because people set their financial plans for retirement many years in advance. Maybe I'm missing something, but I'd have thought that was only a problem if the goverment was planning to force people to retire earlier. Anyway, most of what I've read in the past suggests that the big problem we have is not people who plan their retirement finances way in advance, but people who make no provision for retirement at all.
For me, the Tories are on the right lines on pensions. The rest of their ideas affecting the elderly have a lot less merit. Despite the strain on the public finances, the Tories apparently feel they have to honour their previous pledge to eliminate inheritance tax on estates of less than £1 million. As I never tire of saying, I don't find it hard to choose between paying taxes now and paying taxes when I'm dead. The Tories are plain wrong on this issue, though from a party built on inherited wealth I suppose we can't expect anything else.
Then there's the plan to provide free residential care to anyone willing to make a one-off payment of £8000 to the state when they retire. This would remove the supposed iniquity of people having to sell their homes in order to pay for their care, though as I've noted before, this is not iniquitous for the elderly, only for their heirs, and I'm not sure they should be the ones dictating public policy on this. In any event, the Tory policy is already showing signs of being half-baked. The party has already had to "clarify" that the one-off payment will only entitle you to a voucher for "average" residential home costs. Damn! There goes my plan to take over the entire top floor at the Lanesborough and send the bill to David Cameron.
So far then: one good idea; one bad one; one not fully thought out. Still, at least they're trying.
RBA rate hike -- straw in the wind or outlier?
The good old Reserve Bank of Australia today became the first monetary authority in the G20 to raise interest rates since the onset of the credit crunch. The move was a surprise to most of the world, though to judge from the Bank's statement , it was already priced in to local markets.
The RBA has form in this regard -- it was the first central bank to start raising rates after the 9/11 atrocities, implementing its first rate hike in May 2002, having cut only modestly in response to the attacks. With hindsight, you'd be hard-pressed to say it was wrong about that -- would, indeed, that others including the Fed had seen fit to follow suit. As I've suggested before, the RBA's steady-as-she-goes approach throughout the past decade looks massively smarter than the compulsive tinkering of the Fed, Bank of England and others.
Currencies (other than Sterling) and commodities have rallied in the wake of the RBA decision, which markets seem to see as evidence that the global economy really is on the mend. Caution is needed here. Unlike the US, Eurozone, UK et al, Australia has not experienced a recession in the past couple of years. Labour markets and costs have therefore eased much less than the RBA had expected. What's more, as the RBA statement makes clear, its economic prospects are rendered much more favourable by the signs of a strong recovery in key Asian economies, notably China. In the circumstances, the longer the RBA delays in raising rates, the more risk it will run that inflationary pressures will start to mount.
These conditions are simply not replicated anywhere else in the G20. As a result, it's unlikely that any other central bank will start hiking rates until well into next year. An outlier, then, rather than a straw in the wind -- but that's not to suggest that the RBA has made a mistake.
The RBA has form in this regard -- it was the first central bank to start raising rates after the 9/11 atrocities, implementing its first rate hike in May 2002, having cut only modestly in response to the attacks. With hindsight, you'd be hard-pressed to say it was wrong about that -- would, indeed, that others including the Fed had seen fit to follow suit. As I've suggested before, the RBA's steady-as-she-goes approach throughout the past decade looks massively smarter than the compulsive tinkering of the Fed, Bank of England and others.
Currencies (other than Sterling) and commodities have rallied in the wake of the RBA decision, which markets seem to see as evidence that the global economy really is on the mend. Caution is needed here. Unlike the US, Eurozone, UK et al, Australia has not experienced a recession in the past couple of years. Labour markets and costs have therefore eased much less than the RBA had expected. What's more, as the RBA statement makes clear, its economic prospects are rendered much more favourable by the signs of a strong recovery in key Asian economies, notably China. In the circumstances, the longer the RBA delays in raising rates, the more risk it will run that inflationary pressures will start to mount.
These conditions are simply not replicated anywhere else in the G20. As a result, it's unlikely that any other central bank will start hiking rates until well into next year. An outlier, then, rather than a straw in the wind -- but that's not to suggest that the RBA has made a mistake.
Monday, 5 October 2009
Beckham for President!
Even the most passionate Europhile must feel heartsick at the prospect of Tony Blair becoming the first President of the EU.
Tony Blair, the man who alienated most of Europe with his grovelling attitude to the United States and his gung-ho support for the invasion of Iraq.
Tony Blair, the man whose high-profile, high-cost role as a peace envoy in the Middle East has been so ineffective that you can't even call it a failure. In order to fail, you have to try, and there's not much evidence that Blair has done that. (As soon as he landed the job, he swanned off to Barbados for a three-week break. That rather set the tone for the whole pointless enterprise).
Tony Blair, the relentless moneygrubber who is now charging people for the privilege of getting photographed with him -- see previous posting.
The EU Presidency is an almost entirely ceremonial post, so in a sense the vacuous, self-obsessed publicity hound Blair is well qualified. However, if those are the criteria, why not appoint David Beckham? He's well-liked across Europe, his missus would be thrilled -- and he's already got his own palace.
Tony Blair, the man who alienated most of Europe with his grovelling attitude to the United States and his gung-ho support for the invasion of Iraq.
Tony Blair, the man whose high-profile, high-cost role as a peace envoy in the Middle East has been so ineffective that you can't even call it a failure. In order to fail, you have to try, and there's not much evidence that Blair has done that. (As soon as he landed the job, he swanned off to Barbados for a three-week break. That rather set the tone for the whole pointless enterprise).
Tony Blair, the relentless moneygrubber who is now charging people for the privilege of getting photographed with him -- see previous posting.
The EU Presidency is an almost entirely ceremonial post, so in a sense the vacuous, self-obsessed publicity hound Blair is well qualified. However, if those are the criteria, why not appoint David Beckham? He's well-liked across Europe, his missus would be thrilled -- and he's already got his own palace.
Sunday, 27 September 2009
Forgotten but not gone
According to reports in the media, Tony Blair is supplementing his pitiful 7-figure income by charging punters £180 to get their picture takem with him. One of Blair's entourage claims that Blair is worshipped in America -- they see him as "a cross between Churchill, the Queen and Margaret Thatcher".
So he's a depressive, boozy fascist who thinks he has a divine right to rule? Wish we'd been told that when he was running for office.
So he's a depressive, boozy fascist who thinks he has a divine right to rule? Wish we'd been told that when he was running for office.
Hypocrisy to the Max
There's no way Baroness Scotland should be allowed to keep her job as Attorney General after admitting that she employed an illegal immigrant. It would be like Alastair Darling remaining as Chancellor after being convicted of robbing a bank.
Still, there's no excuse for the double standards evident in some of the media reportage. I'm thinking in particular of the Mail on Sunday, which has today published said immigrant's account of the affair. Reportedly, the MoS paid up to £100,000 for the exclusive rights to the story, with the usual 25% cut going to the oleaginous Max Clifford. On what basis is it verboten for Baroness Scotland to pay an illegal immigrant for services rendered, but perfectly OK for the Mail on Sunday to do the same thing?
Still, there's no excuse for the double standards evident in some of the media reportage. I'm thinking in particular of the Mail on Sunday, which has today published said immigrant's account of the affair. Reportedly, the MoS paid up to £100,000 for the exclusive rights to the story, with the usual 25% cut going to the oleaginous Max Clifford. On what basis is it verboten for Baroness Scotland to pay an illegal immigrant for services rendered, but perfectly OK for the Mail on Sunday to do the same thing?
Friday, 25 September 2009
Darling shreds Fred
This week's final episode of "The Love of Money", the BBC's excellent series on the credit crunch, focused primarily on the role played by politicians and public servants in trying to deal with the crisis. So we heard from the likes of Gordon Brown, President "Lula" of Brazil and the Icelandic Finance Minister -- though interestingly, not from Hank Paulson, who "declined to speak on camera".
Each of the programmes in this series has provided fresh insights. This week's came from Alastair Darling, who revealed some of what happened when the British Government met with senior bankers to figure out how the Government could inject capital into the more vulnerable institutions. According to Darling, RBS boss Sir Fred Goodwin kept insisting, to the utter disbelief of both his competitors and the politicians, that his bank didn't have a capital problem, it just had a liquidity problem.
Recounting this one year on, Darling delivered one of the most withering putdowns I've ever heard from any politician: "The first line of defence is having people in the boardroom who know what's going on in their own business". Even the unrepentant Sir Fred, if he was tuned in at home in Edinburgh, must have crawled behind the sofa when he heard that.
There's no way of knowing whether Darling thought that one up himself, or whether one of his speechwriters came up with it -- in which case, give that man or woman a raise! However, you have to hope that the Government and regulators see that it's more than just brilliant zinger: it's also a truth that needs to be kept in mind as new rules for the financial sector are drawn up. Banks aren't charities. They didn't and don't pay big bonuses out of the goodness of their hearts. They pay them because they believe they are making lots of money, and will continue to do so if they retain the big producers. The role of the "people in the boardroom" and of senior management is to ask how the money is being made. Did anyone on the board at Northern Rock question how it came to pass that a sleepy regional building society was providing more than a fifth of the new mortgage loans in the UK? Did the board at RBS try to stop Sir Fred from taking over ABN Amro at a silly price right before the crash?
Attacking the bonus culture is easy and fun, but it's only a symptom. Putting some steel into the spine of bank directors and senior management is difficult. As a minimum, it requires tighter capital requirements and more intrusive regulation. The G20 seems to be moving in that direction -- but the bankers, amazingly enough, seem likely to put up a fierce resistsnce.
Each of the programmes in this series has provided fresh insights. This week's came from Alastair Darling, who revealed some of what happened when the British Government met with senior bankers to figure out how the Government could inject capital into the more vulnerable institutions. According to Darling, RBS boss Sir Fred Goodwin kept insisting, to the utter disbelief of both his competitors and the politicians, that his bank didn't have a capital problem, it just had a liquidity problem.
Recounting this one year on, Darling delivered one of the most withering putdowns I've ever heard from any politician: "The first line of defence is having people in the boardroom who know what's going on in their own business". Even the unrepentant Sir Fred, if he was tuned in at home in Edinburgh, must have crawled behind the sofa when he heard that.
There's no way of knowing whether Darling thought that one up himself, or whether one of his speechwriters came up with it -- in which case, give that man or woman a raise! However, you have to hope that the Government and regulators see that it's more than just brilliant zinger: it's also a truth that needs to be kept in mind as new rules for the financial sector are drawn up. Banks aren't charities. They didn't and don't pay big bonuses out of the goodness of their hearts. They pay them because they believe they are making lots of money, and will continue to do so if they retain the big producers. The role of the "people in the boardroom" and of senior management is to ask how the money is being made. Did anyone on the board at Northern Rock question how it came to pass that a sleepy regional building society was providing more than a fifth of the new mortgage loans in the UK? Did the board at RBS try to stop Sir Fred from taking over ABN Amro at a silly price right before the crash?
Attacking the bonus culture is easy and fun, but it's only a symptom. Putting some steel into the spine of bank directors and senior management is difficult. As a minimum, it requires tighter capital requirements and more intrusive regulation. The G20 seems to be moving in that direction -- but the bankers, amazingly enough, seem likely to put up a fierce resistsnce.
Monday, 21 September 2009
Learned nothing and forgotten nothing
I haven't taken a pop at Anatole Kaletsky for a while, but his piece in today's Times, titled "Economic policymakers should sit tight until 2011", is just too imbecilic to resist.
Kaletsky starts by repeating his surely discredited argument that the credit crisis only became a serious problem when the US allowed Lehman Brothers to collapse. Yes, it's still all Hank Paulson's fault: "It was Mr Paulson’s testimony before the Senate on September 23, to explain what he would do with this money, that turned the crisis into a previously unimaginable nightmare, by revealing that the man supposedly in charge of the world’s most important economy literally did not know what he was talking about". Well, Anatole certainly knows how it feels not to know what you're talking about.
Personally, I don't remember feeling all that comfortable about the crisis right up until the point where Lehman went under, as Kaletsky now claims he did. Neither do most other media commentators. For example, Jeremy Warner over at the Telegraph took issue with the "blame Hank" approach just a couple of weeks ago. As he, and I, and just about everyone else now sees it, if it hadn't been Lehman, it would almost certainly have been someone else. (Probably Merrill Lynch, but for John Thain's shameless scuppering of Bank of America's planned rescue of Lehman: see my previous posting).
That's all history now, of course. Much more disturbing is Kaletsky's prescription for the future: expansionary fiscal policy at least until 2011, and lax monetary policy basically for an indefinite period. Scary quote: "The low interest rate policy adopted by Alan Greenspan to support the US economy after 9/11 and the dot-com crash is now being implemented by the world as a whole. The probable result is that asset prices will again rise rapidly and financial activity will accelerate..."
Rejoice, saya Anatole. The whole world now enjoys the discredited monetary stance that got the US and the rest of us into so much trouble so recently. And even Kaletsky acknowledges that it will lead to the same outcome. Not a problem, though: "Booms and busts in asset prices are a natural feature of the capitalist system and the only way to prevent them would be either to paralyse the creativity of private enterprise or to keep the economy permanently depressed, with unemployment needlessly high". Anyway, Kaletsky knows the solution: "The real challenge for policymakers, therefore, is to find ways of channelling the next upsurge of financial activity into more constructive and sustainable investments than the last one". Phew, we're saved. Oh, hang on though: "But how exactly to design these improved regulations and better public-private partnerships is far from obvious".
It's hard to overstate how completely fatuous a piece Kaletsky has delivered here, especially since at the end of it he can't even come up with a concrete proposal. What's more, he's almost certainly wrong about the desirability of keeping rates low for a long period, and not just because of the risk of another asset price bubble. One of the more interesting pieces I've seen recently suggested that near-zero rates are directly contributing to the ongoing paralysis in the credit market. If you're a sound bank with lots of cash on hand, why would you lend it for almost no return to another bank that might still be facing credit problems? Better just to keep it in the vault. Even the most junior banker would understand that, but it's undoubtedly way beyond Kaletsky.
Kaletsky starts by repeating his surely discredited argument that the credit crisis only became a serious problem when the US allowed Lehman Brothers to collapse. Yes, it's still all Hank Paulson's fault: "It was Mr Paulson’s testimony before the Senate on September 23, to explain what he would do with this money, that turned the crisis into a previously unimaginable nightmare, by revealing that the man supposedly in charge of the world’s most important economy literally did not know what he was talking about". Well, Anatole certainly knows how it feels not to know what you're talking about.
Personally, I don't remember feeling all that comfortable about the crisis right up until the point where Lehman went under, as Kaletsky now claims he did. Neither do most other media commentators. For example, Jeremy Warner over at the Telegraph took issue with the "blame Hank" approach just a couple of weeks ago. As he, and I, and just about everyone else now sees it, if it hadn't been Lehman, it would almost certainly have been someone else. (Probably Merrill Lynch, but for John Thain's shameless scuppering of Bank of America's planned rescue of Lehman: see my previous posting).
That's all history now, of course. Much more disturbing is Kaletsky's prescription for the future: expansionary fiscal policy at least until 2011, and lax monetary policy basically for an indefinite period. Scary quote: "The low interest rate policy adopted by Alan Greenspan to support the US economy after 9/11 and the dot-com crash is now being implemented by the world as a whole. The probable result is that asset prices will again rise rapidly and financial activity will accelerate..."
Rejoice, saya Anatole. The whole world now enjoys the discredited monetary stance that got the US and the rest of us into so much trouble so recently. And even Kaletsky acknowledges that it will lead to the same outcome. Not a problem, though: "Booms and busts in asset prices are a natural feature of the capitalist system and the only way to prevent them would be either to paralyse the creativity of private enterprise or to keep the economy permanently depressed, with unemployment needlessly high". Anyway, Kaletsky knows the solution: "The real challenge for policymakers, therefore, is to find ways of channelling the next upsurge of financial activity into more constructive and sustainable investments than the last one". Phew, we're saved. Oh, hang on though: "But how exactly to design these improved regulations and better public-private partnerships is far from obvious".
It's hard to overstate how completely fatuous a piece Kaletsky has delivered here, especially since at the end of it he can't even come up with a concrete proposal. What's more, he's almost certainly wrong about the desirability of keeping rates low for a long period, and not just because of the risk of another asset price bubble. One of the more interesting pieces I've seen recently suggested that near-zero rates are directly contributing to the ongoing paralysis in the credit market. If you're a sound bank with lots of cash on hand, why would you lend it for almost no return to another bank that might still be facing credit problems? Better just to keep it in the vault. Even the most junior banker would understand that, but it's undoubtedly way beyond Kaletsky.
Friday, 11 September 2009
Pulling the plug on Lehman
The BBC has been running some special programmes to mark the first anniversary of the collapse of Lehman Brothers. First it showed a fictionalised reconstruction of the events of that extraordinary weekend, then a documentary covering exactly the same period. When I saw this in the TV listings I thought it looked a bit strange, but the two complemented each other quite well. In some ways the fictional piece looked less phoney than the documentary, especially given the latter's hamfisted attempts to put the events into the context of a New York weekend. ("Across the city at Shea Stadium, the home town New York Mets are losing to Atlanta. It's a bad omen". No, I'm not making that up.)
Stylistic questions aside, the stories told in the two programmes were consistent. Much of what happened that weekend is well known now, but there was one element that I hadn't fully picked up on in the past. At the start of the weekend, the CEOs of the major New York financial institutions, minus Dick Fuld of Lehman Brothers, were summoned to meet with Treasury Secretary Hank Paulson at the New York Fed. Two firms, Bank of America and Barclays, were undertaking due diligence on Lehman's books at the time, but Paulson urged the other firms to take steps to ensure that the global financial system would not collapse when markets resumed activity after the weekend.
One of them certainly took action, though probably not the kind that Paulson had in mind. John Thain of Merrill Lynch quickly came to the conclusion that Lehman was going to go bankrupt, and that his own firm might be next. He left the meeting, went out into the street and called Ken Lewis, the CEO of Bank of America, offering a merger betweeen their two companies. Lewis promptly flew to New York, ended the due diligence review of Lehman and put together a deal with Merrill. When Barclays was unable to put together a deal for Lehman, the company's death was assured.
The voiceover of the documentary remarked that this certainly proved the old Wall Street axiom, "eat or be eaten". True, but my reaction was a bit different. Wasn't Thain in a position of conflict of interest? Having been taken into the Government's confidence, might it not have been illegal for him to torpedo the best deal available for Lehman with a view to saving his own company's skin? If Lehman had been through a merger with BofA, it's possible that the short sellers would have turned their baleful attentions on Merrill next; but it's also possible that the deal would have calmed the markets, leaving Merrill independent while saving investors a great deal of grief and taxpayers an immense amount of money.
You can never be certain with counterfactuals, of course. Still, if Hank Paulson saw the heads of the big banks scrambling to grab the best seats in the lifeboat for themselves, it's hard to blame him for refusing to throw them any more Government money.
Stylistic questions aside, the stories told in the two programmes were consistent. Much of what happened that weekend is well known now, but there was one element that I hadn't fully picked up on in the past. At the start of the weekend, the CEOs of the major New York financial institutions, minus Dick Fuld of Lehman Brothers, were summoned to meet with Treasury Secretary Hank Paulson at the New York Fed. Two firms, Bank of America and Barclays, were undertaking due diligence on Lehman's books at the time, but Paulson urged the other firms to take steps to ensure that the global financial system would not collapse when markets resumed activity after the weekend.
One of them certainly took action, though probably not the kind that Paulson had in mind. John Thain of Merrill Lynch quickly came to the conclusion that Lehman was going to go bankrupt, and that his own firm might be next. He left the meeting, went out into the street and called Ken Lewis, the CEO of Bank of America, offering a merger betweeen their two companies. Lewis promptly flew to New York, ended the due diligence review of Lehman and put together a deal with Merrill. When Barclays was unable to put together a deal for Lehman, the company's death was assured.
The voiceover of the documentary remarked that this certainly proved the old Wall Street axiom, "eat or be eaten". True, but my reaction was a bit different. Wasn't Thain in a position of conflict of interest? Having been taken into the Government's confidence, might it not have been illegal for him to torpedo the best deal available for Lehman with a view to saving his own company's skin? If Lehman had been through a merger with BofA, it's possible that the short sellers would have turned their baleful attentions on Merrill next; but it's also possible that the deal would have calmed the markets, leaving Merrill independent while saving investors a great deal of grief and taxpayers an immense amount of money.
You can never be certain with counterfactuals, of course. Still, if Hank Paulson saw the heads of the big banks scrambling to grab the best seats in the lifeboat for themselves, it's hard to blame him for refusing to throw them any more Government money.
Monday, 7 September 2009
Bankers' bonuses and all that
For now, it looks as though the US and UK have seen off pressure from other G20 governments to impose stringent limits on bankers' compensation, especially bonuses. France is threatening to go it alone, but investment bankers in Paris are already threatening to move out, so it remains to be seen how tough the Sarkozy government will eventually be.
There still seems to be a visceral desire among the public and politicians alike to "do something" about the bonus culture in the financial sector. Given what we've been through in the past two years, this is understandable. However, bonuses were only a small part of what brought the financial system to its knees, and curbing them can only be a small part of the solution. I'm still far from sure of what needs to be done to strengthen the system, partly because there are so many parties to blame for what went wrong. For instance....
* Certain Central Banks (notably the Fed and the Bank of England) were far too willing to believe their own press releases about defeating inflation. Stability in consumer prices owed much more to the flood of cheap goods from Asia than to any new monetary paradigm. Lax monetary policies fostered both soaring asset prices and the explosive growth in financial institutions' balance sheets.
* Governments (the US and UK again in the van) were willing to turn a blind eye to the explosive growth in personal debt as long as it preserved the illusion of healthy growth in their economies.
* The public and the media showed no appetite for reining things in before the crisis hit. The debt-fuelled housing booms in the US, UK, Spain, Ireland and elsewhere were almost universally lauded as a "good thing" until the house of cards collapsed.
* Regulators entirely failed to understand the risks posed both by the growth in FIs' balance sheets and by the increasing complexity of the financial instruments that the banks were employing. In particular they underestimated the significance of growing reliance on wholesale funding and the resultant risk that the whole system could freeze up almost overnight.
* Ratings agencies threw around AAA ratings for new products like confetti while failing completely to understand the risks. No doubt many of the derivatives they were asked to opine on were complex, but some sort of macho unwillingness to admit that they simply didn't understand the products seems to have got in the way of proper due diligence. No banker, or at least no lender, would have been in any way surprised by the ineptitude of the ratings agencies, which has been repeatedly demonstrated over many decades. However, investors, even big ones who should have known much better, continued to rely on their opinions right up until the crisis hit.
Which brings us, finally, to the banks themselves. Take lax regulation, complacent-to-irresponsible monetary policy, debt-happy governments and citizens, and add smart, greedy, Type-A financiers, and what other outcome could you possibly expect? I'm not sure it's correct to assert that none of the banks could see the problems building up; rather, I think there was something of a fallacy of composition. Each bank assumed that its own position was manageable, without considering the implications of the fact that every other major institution was facing a similar risk profile. Sure, there were some abuses going on: "guaranteed bonuses", upfront rewards for assumed long-term profits and such. But these were symptoms of the excesses throughout the financial system or indeed the whole economy, rather than the causes of the crisis.
So what does this all mean for attempts to curb bonuses? Well, it seems to me that if Governments can agree on better regulation (including higher capital requirements) and central banks can resist the temptation to play the good guy by keeping monetary policy excessively lax, then the excess or illusory profits that encouraged the payment of monster bonuses would largely disappear. You could throw in a few steps like restricting "guaranteed bonuses" and requiring bonus payouts to be spread over a longer period or tied to stock prices, though those would mainly be for the purpose of playing to the gallery of public opinion. It's just a matter of restoring common sense, boring as that may be. Sadly, however, that's been in such short supply over the past decade that I'm not optimistic that the G20 meeting in Pittsburgh at the end of the month will do anything worthwhile.
There still seems to be a visceral desire among the public and politicians alike to "do something" about the bonus culture in the financial sector. Given what we've been through in the past two years, this is understandable. However, bonuses were only a small part of what brought the financial system to its knees, and curbing them can only be a small part of the solution. I'm still far from sure of what needs to be done to strengthen the system, partly because there are so many parties to blame for what went wrong. For instance....
* Certain Central Banks (notably the Fed and the Bank of England) were far too willing to believe their own press releases about defeating inflation. Stability in consumer prices owed much more to the flood of cheap goods from Asia than to any new monetary paradigm. Lax monetary policies fostered both soaring asset prices and the explosive growth in financial institutions' balance sheets.
* Governments (the US and UK again in the van) were willing to turn a blind eye to the explosive growth in personal debt as long as it preserved the illusion of healthy growth in their economies.
* The public and the media showed no appetite for reining things in before the crisis hit. The debt-fuelled housing booms in the US, UK, Spain, Ireland and elsewhere were almost universally lauded as a "good thing" until the house of cards collapsed.
* Regulators entirely failed to understand the risks posed both by the growth in FIs' balance sheets and by the increasing complexity of the financial instruments that the banks were employing. In particular they underestimated the significance of growing reliance on wholesale funding and the resultant risk that the whole system could freeze up almost overnight.
* Ratings agencies threw around AAA ratings for new products like confetti while failing completely to understand the risks. No doubt many of the derivatives they were asked to opine on were complex, but some sort of macho unwillingness to admit that they simply didn't understand the products seems to have got in the way of proper due diligence. No banker, or at least no lender, would have been in any way surprised by the ineptitude of the ratings agencies, which has been repeatedly demonstrated over many decades. However, investors, even big ones who should have known much better, continued to rely on their opinions right up until the crisis hit.
Which brings us, finally, to the banks themselves. Take lax regulation, complacent-to-irresponsible monetary policy, debt-happy governments and citizens, and add smart, greedy, Type-A financiers, and what other outcome could you possibly expect? I'm not sure it's correct to assert that none of the banks could see the problems building up; rather, I think there was something of a fallacy of composition. Each bank assumed that its own position was manageable, without considering the implications of the fact that every other major institution was facing a similar risk profile. Sure, there were some abuses going on: "guaranteed bonuses", upfront rewards for assumed long-term profits and such. But these were symptoms of the excesses throughout the financial system or indeed the whole economy, rather than the causes of the crisis.
So what does this all mean for attempts to curb bonuses? Well, it seems to me that if Governments can agree on better regulation (including higher capital requirements) and central banks can resist the temptation to play the good guy by keeping monetary policy excessively lax, then the excess or illusory profits that encouraged the payment of monster bonuses would largely disappear. You could throw in a few steps like restricting "guaranteed bonuses" and requiring bonus payouts to be spread over a longer period or tied to stock prices, though those would mainly be for the purpose of playing to the gallery of public opinion. It's just a matter of restoring common sense, boring as that may be. Sadly, however, that's been in such short supply over the past decade that I'm not optimistic that the G20 meeting in Pittsburgh at the end of the month will do anything worthwhile.
We need a Libya "Czar" NOW!
The events surrounding the release of the Lockerbie bomber Abdelbaset al-Megrahi have underlined just how demoralised, unprincipled and chaotic the Brown Government has become. There was a very makeable case for releasing al-Megrahi, but Brown and his minions haven't attempted to make it. There was a case for keeping him in custody, but they haven't made that case either. Instead, with steadily dwindling credibility they've attempted to wash their hands of the whole matter by claiming it was a purely a decision of the Scottish government. Brown himself signed a letter to the Libyans some time ago saying that the Government did not want al-Megrahi to die in prison, yet today his Mini-me Ed Balls is claiming that Brown always opposed the release.
Now Brown has chosen to tie himself still further in knots, by announcing that the Foreign Office will provide dedicated help to victims of IRA violence who are trying to claim compensation from Libya -- this after the Government has stonewalled these same people for many years. (Jeremy Vine made the rather interesting point on Radio 2 today that it would make more sense to seek compensation from the United States, whose citizens paid for the Semtex used in the bombings, rather than from the Libyans, who simply supplied it). Tripoli has already repudiated any claims, and no doubt by raising the issue Brown has undone any good he thought he might have done in rebuilding UK-Libyan relations, without in any way assuaging opinion in the US.
Anyway, based on recent precedent we'll only know that Brown is taking the matter seriously when he appoints some TV personality or other to front up the operation. Could this be the real reason for Sir Terry Wogan's departure from his morning show?
Now Brown has chosen to tie himself still further in knots, by announcing that the Foreign Office will provide dedicated help to victims of IRA violence who are trying to claim compensation from Libya -- this after the Government has stonewalled these same people for many years. (Jeremy Vine made the rather interesting point on Radio 2 today that it would make more sense to seek compensation from the United States, whose citizens paid for the Semtex used in the bombings, rather than from the Libyans, who simply supplied it). Tripoli has already repudiated any claims, and no doubt by raising the issue Brown has undone any good he thought he might have done in rebuilding UK-Libyan relations, without in any way assuaging opinion in the US.
Anyway, based on recent precedent we'll only know that Brown is taking the matter seriously when he appoints some TV personality or other to front up the operation. Could this be the real reason for Sir Terry Wogan's departure from his morning show?
Thursday, 3 September 2009
Here comes the "neverendum"
It's not al-Megrahi, all the time at the Scottish Parliament. The SNP government has announced its legislative programme for the coming session, and it includes a bill to hold a referendum on Scottish independence in 2010. First Minister Alex Salmond said it was time for the voice of the people of Scotland to be heard.
Since the three opposition parties at Holyrood outnumber the SNP, the referendum bill may not pass. However, it would be politically risky for the Tories, SNP and Labour to oppose it -- "what are they so afraid of?", as Salmond would undoubtedly ask. If there is a referendum, opinion polls suggest it will fail to deliver a majority for outright independence. Back in the days of the Quebec referenda in Canada, a Quebec comedian said that what Quebecers wanted was "a free, independent Quebec in a strong, united Canada". It was a joke, but it captured the ambivalent feelings of a majority of Quebecers. I suspect a large proportion of the Scottish electorate feels the same way.
There's a good possibility that the SNP will try to boost support by asking a vague and unthreatening question, though the Quebec precedent argues against that. The question in the first Quebec referendum (in the 1980s) offered something called "sovereignty-association" rather than outright independence, but this was heavily defeated. The question in the second referendum was much more straightforward -- and Quebecers came within one percentage point of voting to leave Canada.
So, the result of the vote is unpredictable, but here's one fearless forecast, again based on what happened in Quebec. If "the voice of the people of Scotland" favours independence by even the smallest of margins, Alex Salmond et al will regard it as "history's irrevocable verdict" or something such and will push for early independence talks. If the vote goes against them, they'll immediately start planning to ask the question again.
Since the three opposition parties at Holyrood outnumber the SNP, the referendum bill may not pass. However, it would be politically risky for the Tories, SNP and Labour to oppose it -- "what are they so afraid of?", as Salmond would undoubtedly ask. If there is a referendum, opinion polls suggest it will fail to deliver a majority for outright independence. Back in the days of the Quebec referenda in Canada, a Quebec comedian said that what Quebecers wanted was "a free, independent Quebec in a strong, united Canada". It was a joke, but it captured the ambivalent feelings of a majority of Quebecers. I suspect a large proportion of the Scottish electorate feels the same way.
There's a good possibility that the SNP will try to boost support by asking a vague and unthreatening question, though the Quebec precedent argues against that. The question in the first Quebec referendum (in the 1980s) offered something called "sovereignty-association" rather than outright independence, but this was heavily defeated. The question in the second referendum was much more straightforward -- and Quebecers came within one percentage point of voting to leave Canada.
So, the result of the vote is unpredictable, but here's one fearless forecast, again based on what happened in Quebec. If "the voice of the people of Scotland" favours independence by even the smallest of margins, Alex Salmond et al will regard it as "history's irrevocable verdict" or something such and will push for early independence talks. If the vote goes against them, they'll immediately start planning to ask the question again.
Sunday, 30 August 2009
Where The Sun don't shine
The Murdoch media have been less-than-subtly ramping up their attacks on the BBC in recent weeks, arguing that Auntie should not be allowed to publish what amounts to a free newspaper on its very extensive website. This is of course in no way connected to Rupert Murdoch's musings about starting to charge for news content on his own websites in the next twelve months.
Now James "I got the job on pure merit" Murdoch, President of News Corp, has pitched in with an all-out assault on the BBC and on the regulation of UK media. Murdoch wants the BBC to be "much, much smaller" and wants it to stop using public money to compete with commercial newsgathering operations such as Sky News. He also wants the requirement for TV to provide unbiased news coverage to be eliminated.
Let's see if I understand this. It's OK for News Corp., owned and controlled by a man who changed his nationality in order to circumvent media ownership rules in the United States, to seize a near-monopoly of satellite TV in the UK; it's OK to take most live sport off the free airwaves, coming close to destroying the actual sports in the process, and it's OK to use the group's print media, especially The Sun, to provide shameless plugs for the rest of the group's outlets. But it's an outrage for the publicly-owned BBC to disseminate the products of its newsgathering team, which is probably still the best in the world, over the Internet in competition with Murdoch's rather less vaunted crew.
As for the "unbiased" requirement, anyone who has seen Murdoch's Fox News outlet in the US (motto "Fair and Balanced"!) will perhaps have some doubts about letting the same breed of knuckle-dragging bigots loose on the British airwaves. (Mr Eugenides provides a link to a hilarious piece by Fox's singularly loathsome Glenn Beck here).
The worrying thing is that the BBC has so few defenders among the political classes these days. Labour has probably still not forgiven the whole "dodgy dossier" episode, and has certainly taken Murdoch's shilling in the past ("it was The Sun wot won it"). Now that Murdoch is clearly planning to endorse the Tories in the next election, you wonder what favours he may be looking for in return.
Reportedly, James Murdoch and Robert Peston got into a big shouting match after Murdoch's speech. Normally this would be one of those fights where I'd be rooting for both egomaniacal combatants to get KO'd, but in this case I'm firmly in Pesto's corner.
Now James "I got the job on pure merit" Murdoch, President of News Corp, has pitched in with an all-out assault on the BBC and on the regulation of UK media. Murdoch wants the BBC to be "much, much smaller" and wants it to stop using public money to compete with commercial newsgathering operations such as Sky News. He also wants the requirement for TV to provide unbiased news coverage to be eliminated.
Let's see if I understand this. It's OK for News Corp., owned and controlled by a man who changed his nationality in order to circumvent media ownership rules in the United States, to seize a near-monopoly of satellite TV in the UK; it's OK to take most live sport off the free airwaves, coming close to destroying the actual sports in the process, and it's OK to use the group's print media, especially The Sun, to provide shameless plugs for the rest of the group's outlets. But it's an outrage for the publicly-owned BBC to disseminate the products of its newsgathering team, which is probably still the best in the world, over the Internet in competition with Murdoch's rather less vaunted crew.
As for the "unbiased" requirement, anyone who has seen Murdoch's Fox News outlet in the US (motto "Fair and Balanced"!) will perhaps have some doubts about letting the same breed of knuckle-dragging bigots loose on the British airwaves. (Mr Eugenides provides a link to a hilarious piece by Fox's singularly loathsome Glenn Beck here).
The worrying thing is that the BBC has so few defenders among the political classes these days. Labour has probably still not forgiven the whole "dodgy dossier" episode, and has certainly taken Murdoch's shilling in the past ("it was The Sun wot won it"). Now that Murdoch is clearly planning to endorse the Tories in the next election, you wonder what favours he may be looking for in return.
Reportedly, James Murdoch and Robert Peston got into a big shouting match after Murdoch's speech. Normally this would be one of those fights where I'd be rooting for both egomaniacal combatants to get KO'd, but in this case I'm firmly in Pesto's corner.
Friday, 28 August 2009
Ryanisation
I'm no fan of Ryanair: its mendacious pricing, its borderline flouting of regulations and its outright contempt for its customers. A couple of Saturdays ago it provided 11 check-in desks at Stansted Airport while operating over 250 flights. Thousands of passengers were left behind, but of course as Ryanair sees it, that's their fault, or possibly the airport's, and they won't be getting any compensation.
Luckily I have a choice of airlines. I flew Ryanair a couple of times, when it was smaller and marginally less unpleasant than it is now, but I consciously avoid having anything to do with it any more.
It seems that some people admire Ryanair rather more than I do. According to The Guardian and other papers, the local (Tory) council in the London Borough of Barnet are looking at the Ryanair model in the provision of public services. It's not entirely clear what this means, but it appears that the council is looking to provide only the most basic of services "free" (i.e. paid for by all taxpayers), while charging for anything it deems to be an add-on.
Predictably, there's talk of contracting out service provision to the private sector, as if that's a new idea. Just about everything in my own area (which as it happens is just north of Barnet) is already contracted out. Some things, such as rubbish collection, work tolerably well, though I'm not entirely thrilled by the fact that the recycling lorry turns up at 6:30 in the morning. Others, such as road maintenance, are expensive and appallingly badly done.
Even if the private sector could do the job better, though, there would still be a philosophical issue. I have two levels of choice with Ryanair: to travel with them or not; and if I do travel with them, to pay for all the "extras" or not. I don't have the first and more important of those choices with my local council -- I can't get someone else to repair the potholes at the end of my street. Efficiency is a desirable thing, in both private and public sectors. However, it's wrong to assume that the pricing practices that might work for a wholly discretionary transaction, like that 6am flight to Bydgoszcz, can be applied to the monopoly provision of public services.
Luckily I have a choice of airlines. I flew Ryanair a couple of times, when it was smaller and marginally less unpleasant than it is now, but I consciously avoid having anything to do with it any more.
It seems that some people admire Ryanair rather more than I do. According to The Guardian and other papers, the local (Tory) council in the London Borough of Barnet are looking at the Ryanair model in the provision of public services. It's not entirely clear what this means, but it appears that the council is looking to provide only the most basic of services "free" (i.e. paid for by all taxpayers), while charging for anything it deems to be an add-on.
Predictably, there's talk of contracting out service provision to the private sector, as if that's a new idea. Just about everything in my own area (which as it happens is just north of Barnet) is already contracted out. Some things, such as rubbish collection, work tolerably well, though I'm not entirely thrilled by the fact that the recycling lorry turns up at 6:30 in the morning. Others, such as road maintenance, are expensive and appallingly badly done.
Even if the private sector could do the job better, though, there would still be a philosophical issue. I have two levels of choice with Ryanair: to travel with them or not; and if I do travel with them, to pay for all the "extras" or not. I don't have the first and more important of those choices with my local council -- I can't get someone else to repair the potholes at the end of my street. Efficiency is a desirable thing, in both private and public sectors. However, it's wrong to assume that the pricing practices that might work for a wholly discretionary transaction, like that 6am flight to Bydgoszcz, can be applied to the monopoly provision of public services.
Tuesday, 25 August 2009
The quality of mercy
It's not difficult to make the case for the release of the convicted Lockerbie bomber, Abdelbaset al-Megrahi. There is plenty of evidence that his conviction as it stands is unsafe -- al-Megrahi appears to have been fitted up. Private Eye has been saying this for years, and so have relatives of some of the UK victims. In the normal course you'd be content to wait for the evidence against the conviction to be tested on appeal in court. But al-Megrahi has terminal prostate cancer, and may well be dead before the appeal process is through, so there's at least a makeable case for releasing him on compassionate grounds. Which is what the Scottish Justice Minister, Kenneth McAskill, has chosen to do.
But if the decision to free al-Megrahi is defensible, how come everyone involved looks so bad?
* McAskill erred badly in meeting al-Megrahi a few weeks before announcing his release, which inevitably creates the impression that some kind of a deal was struck.
* McAskill's boss, Scotttish First Minister Alex Salmond, has been unable to resist the temptation to indulge in his usual bluster and grandstanding.
* As the furore has grown, the UK government has cravenly hidden behind the legal nicety that the decision is "Scotland's alone", ignoring the fact that (a) the UK concluded a prisoner exchange treaty with Libya early this year -- and al-Megrahi is/was the only Libyan in UK custody; (b) Gordon Brown discussed the issue with Muammar Ghadafi some months ago, and (c) Lord Mandelson appears to number a prominent Libyan or two among the slightly dubious characters he habitually meets on other people's yachts.
* The Libyan government, and al-Megrahi himself, seem to have reneged on an apparent undertaking to keep his return to Tripoli as low key as possible. Even if al-Megrahi were completely innocent -- which is very unlikely -- this would be insensitive at best and contemptuous at worst.
However, the dubious honour of exhibiting the worst behaviour of all in this sorry saga has surely gone to the Americans. The level of government and public outrage over McAskill's decision is nauseating, considering the Americans' own record. Less than a year before the Lockerbie atrocity, a US warship (the USS Vincennes) shot down an Iranian civilian airliner over the Persian Gulf, with the loss of more than 200 lives. No-one has ever been punished in any way for this. Just last week, even as the screaming about al-Megrahi was reaching a fever pitch, the US released several members of an Iraqi terrorist group that kidnapped five British citizens in Iraq a few years ago. Supposedly the group has repented of its past misdeeds. However, none of the hostages has ever been found, and four of them are presumed dead. The release ends any hopes of bringing these people to justice.
The repugnant John Bolton was all over the TV news last night, fulminating about al-Megrahi's release. He noted that al-Megrahi had served 14 days in jail for each of the Lockerbie victims. Hell, Bolton has all sorts of buddies who are responsible for much higher body counts than al-Megrahi stood accused of, and none of them has done any jail time at all. As one irate Scottish blogger puts it, "stuff some more freedom fries in yer yap and gie's peace".
But if the decision to free al-Megrahi is defensible, how come everyone involved looks so bad?
* McAskill erred badly in meeting al-Megrahi a few weeks before announcing his release, which inevitably creates the impression that some kind of a deal was struck.
* McAskill's boss, Scotttish First Minister Alex Salmond, has been unable to resist the temptation to indulge in his usual bluster and grandstanding.
* As the furore has grown, the UK government has cravenly hidden behind the legal nicety that the decision is "Scotland's alone", ignoring the fact that (a) the UK concluded a prisoner exchange treaty with Libya early this year -- and al-Megrahi is/was the only Libyan in UK custody; (b) Gordon Brown discussed the issue with Muammar Ghadafi some months ago, and (c) Lord Mandelson appears to number a prominent Libyan or two among the slightly dubious characters he habitually meets on other people's yachts.
* The Libyan government, and al-Megrahi himself, seem to have reneged on an apparent undertaking to keep his return to Tripoli as low key as possible. Even if al-Megrahi were completely innocent -- which is very unlikely -- this would be insensitive at best and contemptuous at worst.
However, the dubious honour of exhibiting the worst behaviour of all in this sorry saga has surely gone to the Americans. The level of government and public outrage over McAskill's decision is nauseating, considering the Americans' own record. Less than a year before the Lockerbie atrocity, a US warship (the USS Vincennes) shot down an Iranian civilian airliner over the Persian Gulf, with the loss of more than 200 lives. No-one has ever been punished in any way for this. Just last week, even as the screaming about al-Megrahi was reaching a fever pitch, the US released several members of an Iraqi terrorist group that kidnapped five British citizens in Iraq a few years ago. Supposedly the group has repented of its past misdeeds. However, none of the hostages has ever been found, and four of them are presumed dead. The release ends any hopes of bringing these people to justice.
The repugnant John Bolton was all over the TV news last night, fulminating about al-Megrahi's release. He noted that al-Megrahi had served 14 days in jail for each of the Lockerbie victims. Hell, Bolton has all sorts of buddies who are responsible for much higher body counts than al-Megrahi stood accused of, and none of them has done any jail time at all. As one irate Scottish blogger puts it, "stuff some more freedom fries in yer yap and gie's peace".
Friday, 21 August 2009
"It all makes work for the working man to do"
One of the Keynes's best-remembered suggestions for dealing with the Great Depression was that it would make sense for governments to pay workers to dig holes and then fill them in again. I'm happy to report that in today's troubled economic times, at least one sector is taking the old Bloomsburyite at his word.
We had a small leak in the water main under the pavement in front of our house this week.
On Tuesday morning I called the water company to report the leak. (Tally so far: workers 1; vehicles 0).
On Tuesday afternoon a man came and looked at the leak and marked the spot with blue dye. He was onsite for about 10 minutes. (Tally so far: workers 2; vehicles 1).
On Wednesday morning two men turned up, dug up the pavement and fixed the leak. They were onsite for an hour and a half, of which at least 45 minutes was spent erecting barriers, signs and so on. Our street is a 50-metre-long cul-de-sac with four houses but hey, you can't be too careful. Anyway, tally so far: workers 4; vehicles 2.
On Thursday afternoon two men turned up in a massive truck. They took down all the barriers and signs, scooped up the stuff the previous crew had dug out of the hole, filled in the hole with fresh screed and tamped it down to a depth of about 6 inches. Then they put all the barriers and signs back up. Time taken: 15 minutes. (Tally so far: workers 6; vehicles 3).
On Friday morning two workers came and took down the barriers again, moving them onto my neighbour's property. They filled the hole with tarmac and smoothed it over, then left. Time taken: 10 minutes. (Tally so far: workers 8; vehicles 4).
Finally, at lunchtime on Friday two men turned up, took 5 minutes to load all the barriers and signs onto a small truck and drove away. Job done! Final tally: workers 10; vehicles 5.
I can have no possible complaints about the speedy response to my initial call, and I suppose the contractor has figured out that this is the most cost-effective way to work. In the old days, though, I'm pretty sure that one truck would have showed up with all the tools needed for the job, there would have been a whole lot less arsing around with barriers and it would all have been completed in one afternoon. Still, I'm sure Keynes would have enjoyed it.
We had a small leak in the water main under the pavement in front of our house this week.
On Tuesday morning I called the water company to report the leak. (Tally so far: workers 1; vehicles 0).
On Tuesday afternoon a man came and looked at the leak and marked the spot with blue dye. He was onsite for about 10 minutes. (Tally so far: workers 2; vehicles 1).
On Wednesday morning two men turned up, dug up the pavement and fixed the leak. They were onsite for an hour and a half, of which at least 45 minutes was spent erecting barriers, signs and so on. Our street is a 50-metre-long cul-de-sac with four houses but hey, you can't be too careful. Anyway, tally so far: workers 4; vehicles 2.
On Thursday afternoon two men turned up in a massive truck. They took down all the barriers and signs, scooped up the stuff the previous crew had dug out of the hole, filled in the hole with fresh screed and tamped it down to a depth of about 6 inches. Then they put all the barriers and signs back up. Time taken: 15 minutes. (Tally so far: workers 6; vehicles 3).
On Friday morning two workers came and took down the barriers again, moving them onto my neighbour's property. They filled the hole with tarmac and smoothed it over, then left. Time taken: 10 minutes. (Tally so far: workers 8; vehicles 4).
Finally, at lunchtime on Friday two men turned up, took 5 minutes to load all the barriers and signs onto a small truck and drove away. Job done! Final tally: workers 10; vehicles 5.
I can have no possible complaints about the speedy response to my initial call, and I suppose the contractor has figured out that this is the most cost-effective way to work. In the old days, though, I'm pretty sure that one truck would have showed up with all the tools needed for the job, there would have been a whole lot less arsing around with barriers and it would all have been completed in one afternoon. Still, I'm sure Keynes would have enjoyed it.
Monday, 17 August 2009
USA vs. NHS
In the eyes of its supporters, the American medical system can do no wrong, but it's evidently been powerless to prevent a severe outbreak of foaming at the mouth in and around the Republican Party. I'm not sure why they're picking on the NHS: Canada is a lot closer at hand and has a much more state-dominated health system -- private care is essentially illegal in Canada, apart from dentistry and eyecare, which it certainly isn't in the UK. (Maybe Republicans don't know where Canada and Europe are located in relation to the US. A Spanish colleague of mine once recounted how he had pitched up in St Louis as a student. One of his hosts asked him how long it had taken to drive from Spain to Missouri).
But I digress. Anyway, there's been a lot of humour to be had in the attacks on the NHS. One of my favourites so far has been the broadcaster Sean Hannity, who talked about a man in Lancashire who couldn't find an NHS dentist and decided to reattach a crown using Superglue. "If Obama gets his way" said Hannity, "better stock up on Superglue". It's possible that Hannity doesn't know that you can get private dental care in the UK -- i.e. that you have a choice, which is what the Republicans are supposedly fighting for -- but I think it's much more likely that he chose to conceal that fact from his audience.
It's unfortunate that it's come to this, because if you look beyond the imbecilic ravings of Hannity (and Rush Limbaugh and Glenn Beck and Mark Steyn, to name just a few), there are some sensible voices to be heard on the US right. David Frum (a former George Bush speechwriter, but just this once we won't hold that against him) had an excellent piece in The Times at the end of last week, though unfortunately it's vanished from their website. He noted that the US Government already spends as high a proportion of GDP on health as countries like Canada and the UK do; what drives the overall proportion of US GDP dedicated to health to such extraordinary levels is the amount spent by the private sector, mostly financed through insurance. Frum argues that Government health spending is growing unsustainably fast. His take on the situation is that a lot of the opposition to the Obama plans is coming from senior citizens, who are major recipients of Government health funds and who fear that the Obama plan will direct some of the money away from them. Hence the scare stories about death panels, drug rationing and so on. It's our old friends the grey greedies again, in their US incarnation.
Frum may be right about a lot of this, but I don't think his dispassionate analysis has much in common with the mob protests that are taking place every day across the US. For example, Frum argues that nobody is ever denied treatment at emergency rooms. Hospitals simply add the costs for those who can't or won't pay onto the bills of those who do. This would undoubtedly be news to one redneck I saw last week, screaming into the camera that "these people want their healthcare paid for by those of us who work for a living". Sounds like that's already happening, Bubba.
Ultimately I guess it's none of our business if the US wants to bankrupt itself to pay for healthcare that in terms of measurable outcomes is no better than that in the rest of the world. I just wish they hadn't dragged us into the debate.
FOOTNOTE: an interesting (racial) angle on the US health care debate here.
But I digress. Anyway, there's been a lot of humour to be had in the attacks on the NHS. One of my favourites so far has been the broadcaster Sean Hannity, who talked about a man in Lancashire who couldn't find an NHS dentist and decided to reattach a crown using Superglue. "If Obama gets his way" said Hannity, "better stock up on Superglue". It's possible that Hannity doesn't know that you can get private dental care in the UK -- i.e. that you have a choice, which is what the Republicans are supposedly fighting for -- but I think it's much more likely that he chose to conceal that fact from his audience.
It's unfortunate that it's come to this, because if you look beyond the imbecilic ravings of Hannity (and Rush Limbaugh and Glenn Beck and Mark Steyn, to name just a few), there are some sensible voices to be heard on the US right. David Frum (a former George Bush speechwriter, but just this once we won't hold that against him) had an excellent piece in The Times at the end of last week, though unfortunately it's vanished from their website. He noted that the US Government already spends as high a proportion of GDP on health as countries like Canada and the UK do; what drives the overall proportion of US GDP dedicated to health to such extraordinary levels is the amount spent by the private sector, mostly financed through insurance. Frum argues that Government health spending is growing unsustainably fast. His take on the situation is that a lot of the opposition to the Obama plans is coming from senior citizens, who are major recipients of Government health funds and who fear that the Obama plan will direct some of the money away from them. Hence the scare stories about death panels, drug rationing and so on. It's our old friends the grey greedies again, in their US incarnation.
Frum may be right about a lot of this, but I don't think his dispassionate analysis has much in common with the mob protests that are taking place every day across the US. For example, Frum argues that nobody is ever denied treatment at emergency rooms. Hospitals simply add the costs for those who can't or won't pay onto the bills of those who do. This would undoubtedly be news to one redneck I saw last week, screaming into the camera that "these people want their healthcare paid for by those of us who work for a living". Sounds like that's already happening, Bubba.
Ultimately I guess it's none of our business if the US wants to bankrupt itself to pay for healthcare that in terms of measurable outcomes is no better than that in the rest of the world. I just wish they hadn't dragged us into the debate.
FOOTNOTE: an interesting (racial) angle on the US health care debate here.
Thursday, 13 August 2009
Eurozone growth shock horror
Bill Emmott, former editor of The Economist, grabbed a chunk of The Times op-ed page today to argue that the coming economic recovery will provide a vindication of Thatcherism. According to Bill, it is the more liberal and flexible economies, like the US and Britain, that will benefit the most from the upturn.
Oops. Within hours of The Times hitting the news stands, both Germany and France reported GDP growth of 0.3% in the second quarter of the year, a period in which liberal Britain and flexible US both recorded further falls in output. Both France and Germany saw higher personal consumption, partly in response to car scrappage schemes, as well as improvements in the construction sector.
It will be a long time before anyone can write a definitive account of how the recession unfolded, let alone assess the effectiveness of the fiscal and economic policy measures taken in various countries. Who knows, Bill Emmott's view may even turn out to be accurate in the long run, which is why I'm getting my jeering in now.
That said, I think it's already possible to venture a few thoughts on the relative stances of various central banks. The Fed has been widely praised for its prompt response to the crisis; the Bank of England rather less so. But both must bear responsibility for fostering their countries' debt-financed consumption booms in the first place, through excessively easy monetary policy. In contrast, the ECB (and my other favourite, the RBA) largely ignored pleadings to keep feeding the beast by cutting rates.
As we may now be seeing, it's easier to boost your economy when stimulus is really needed if you haven't already shot your bolt. For overborrowed consumers in the US and the UK, the instinctive first response to emergency cuts in interest rates has been to increase savings and start paying down debt, which is the exact opposite of what the economies need. In countries like France and Germany, where the consumer wasn't tapped out in the first place, stimulus can be much more effective. The steady-as-she-goes approach of the ECB, much ridiculed by Anglo-Saxon commentators during the go-go years, suddenly seems a lot smarter than the trigger-happy lurching around of the Fed and the Bank of England.
Interestingly, I heard an animated debate on CNBC earlier this week about the fate of Fed Chairman Bernanke, whose term expires fairly soon. There seem to be a lot of people gunning for him: supposedly, opinion polls show that Americans distrust the Fed even more than they distrust the IRS. Good old Larry ("who ate all the pies and all the pizzas?") Summers was one of the names mooted as a replacement. I think this would be unfair on Bernanke, who is a student of the Great Depression and whose actions once the crisis broke were massive and effective. I'd have been much more inclined to fire his predecessor -- any time after 1998, basically -- but it's too late for that.
Oops. Within hours of The Times hitting the news stands, both Germany and France reported GDP growth of 0.3% in the second quarter of the year, a period in which liberal Britain and flexible US both recorded further falls in output. Both France and Germany saw higher personal consumption, partly in response to car scrappage schemes, as well as improvements in the construction sector.
It will be a long time before anyone can write a definitive account of how the recession unfolded, let alone assess the effectiveness of the fiscal and economic policy measures taken in various countries. Who knows, Bill Emmott's view may even turn out to be accurate in the long run, which is why I'm getting my jeering in now.
That said, I think it's already possible to venture a few thoughts on the relative stances of various central banks. The Fed has been widely praised for its prompt response to the crisis; the Bank of England rather less so. But both must bear responsibility for fostering their countries' debt-financed consumption booms in the first place, through excessively easy monetary policy. In contrast, the ECB (and my other favourite, the RBA) largely ignored pleadings to keep feeding the beast by cutting rates.
As we may now be seeing, it's easier to boost your economy when stimulus is really needed if you haven't already shot your bolt. For overborrowed consumers in the US and the UK, the instinctive first response to emergency cuts in interest rates has been to increase savings and start paying down debt, which is the exact opposite of what the economies need. In countries like France and Germany, where the consumer wasn't tapped out in the first place, stimulus can be much more effective. The steady-as-she-goes approach of the ECB, much ridiculed by Anglo-Saxon commentators during the go-go years, suddenly seems a lot smarter than the trigger-happy lurching around of the Fed and the Bank of England.
Interestingly, I heard an animated debate on CNBC earlier this week about the fate of Fed Chairman Bernanke, whose term expires fairly soon. There seem to be a lot of people gunning for him: supposedly, opinion polls show that Americans distrust the Fed even more than they distrust the IRS. Good old Larry ("who ate all the pies and all the pizzas?") Summers was one of the names mooted as a replacement. I think this would be unfair on Bernanke, who is a student of the Great Depression and whose actions once the crisis broke were massive and effective. I'd have been much more inclined to fire his predecessor -- any time after 1998, basically -- but it's too late for that.
Wednesday, 5 August 2009
Inglourious banking basterds
HSBC makes £3 billion-plus profit! Still not doing enough to boost lending! Uncooperative bastards!
Barclays makes £3 billion-plus profit! Starts paying big bonuses again! Arrogant bastards!
Northern Rock loses £700 million! Too many bad loans! Useless bastards!
Lloyds loses £4 billion! Fooled into taking over loss-making HBOS! Naive bastards!
Word up to Alastair, George, Vince and most of the media: if any one of you has a coherent sentence to utter about what you think the banks should be doing, please feel free to utter it now. Otherwise, it might be better to just, you know, SHUT IT.
Barclays makes £3 billion-plus profit! Starts paying big bonuses again! Arrogant bastards!
Northern Rock loses £700 million! Too many bad loans! Useless bastards!
Lloyds loses £4 billion! Fooled into taking over loss-making HBOS! Naive bastards!
Word up to Alastair, George, Vince and most of the media: if any one of you has a coherent sentence to utter about what you think the banks should be doing, please feel free to utter it now. Otherwise, it might be better to just, you know, SHUT IT.
Sunday, 2 August 2009
Mind the gap
Silly me! For a while there, I believed that the government was seriously strapped for cash. Why, just this past week, de facto Prime Minister Lord Mandelson said that public spending plans would have to be cut back.
Then we hear of a plan for the government to finance gap years abroad for 500 of this year's graduates, who won't be able to find jobs at home because of the current depressed state of the economy. (This, of course, is in no way the result of the dumbing down of university degrees noted in a report by a committee of MPs this very weekend). The gap year scheme will fall under the remit of....Lord Mandelson.
In other news, over 600 workers at a factory on the Isle of Wight are in the process of being made redundant. The factory makes wind turbines. The government has pledged itself to create "green" jobs and is banking on a massive expansion of wind power to help reduce carbon emissions. Maybe Lord Mandelson can get his 500 graduates to explain what's going on here, because I sure as hell can't figure it out.
Then we hear of a plan for the government to finance gap years abroad for 500 of this year's graduates, who won't be able to find jobs at home because of the current depressed state of the economy. (This, of course, is in no way the result of the dumbing down of university degrees noted in a report by a committee of MPs this very weekend). The gap year scheme will fall under the remit of....Lord Mandelson.
In other news, over 600 workers at a factory on the Isle of Wight are in the process of being made redundant. The factory makes wind turbines. The government has pledged itself to create "green" jobs and is banking on a massive expansion of wind power to help reduce carbon emissions. Maybe Lord Mandelson can get his 500 graduates to explain what's going on here, because I sure as hell can't figure it out.
Tuesday, 28 July 2009
Steyn flu
With the Republican party in disarray, the right-wing media have enthusiastically taken up the task of opposing President Obama at every turn. None is more eloquent than Mark Steyn who, although he lives in New Hampshire, is surely The Most Right-wing Canadian in the World. Steyn's big issue of the moment is health care reform, which he sees as the death knell of all that's good about America.
His latest polemic on the subject is well worth reading, but only because Steyn is such a good writer. The content is a lot less commendable, a farrago of exaggeration and misrepresentation. Steyn is spectacularly (and maybe deliberately) missing the point of Obama's reforms. He notes that life expectancies are very similar not only in the US and "socialized" Europe, but even in countries such as Bosnia/Herzegovina. His take on this fact is that there would be no real health benefit for the US in moving toward a more European health care model. But surely the real question is this: if Bosnia achieves a life expectancy of 78 years while spending a small percentage of its small GDP on health care, what good does it do the US to spend 16% of its much higher GDP to achieve the exact same outcome?
The Obama health care package is partly about "fairness", which Steyn is certainly entitled to deride if he chooses. But if you read Obama's own words, it's much more about reducing America's enormous overspending on health care and freeing up resources for more productive uses. Considering the glaring need to restructure vast swathes of the US economy in the wake of the credit crunch, you'd think even the most died-in-the-wool Republican would see the virtue of that.
His latest polemic on the subject is well worth reading, but only because Steyn is such a good writer. The content is a lot less commendable, a farrago of exaggeration and misrepresentation. Steyn is spectacularly (and maybe deliberately) missing the point of Obama's reforms. He notes that life expectancies are very similar not only in the US and "socialized" Europe, but even in countries such as Bosnia/Herzegovina. His take on this fact is that there would be no real health benefit for the US in moving toward a more European health care model. But surely the real question is this: if Bosnia achieves a life expectancy of 78 years while spending a small percentage of its small GDP on health care, what good does it do the US to spend 16% of its much higher GDP to achieve the exact same outcome?
The Obama health care package is partly about "fairness", which Steyn is certainly entitled to deride if he chooses. But if you read Obama's own words, it's much more about reducing America's enormous overspending on health care and freeing up resources for more productive uses. Considering the glaring need to restructure vast swathes of the US economy in the wake of the credit crunch, you'd think even the most died-in-the-wool Republican would see the virtue of that.
Saturday, 25 July 2009
Vine flu
The latest issue of Private Eye pokes fun at a reporter who apparently tried to compile a story on swine flu by using Twitter -- "send me a tweet if you've had it, tell me what it's like", that kind of thing. No such problems for another journalist. Sarah Vine, "beauty editor" of the Times, solved the problem by going out and catching the disease herself.
Needless to say, it's been good for a lot of copy. At the start of last week, the Times gave two whole pages to Sarah bemoaning how ill she'd been, how the Tamiflu made her throw up, and how unbearable the whole experience would have been if she hadn't had a child minder. In fairness, she does seem to have been quite ill, though I can't help thinking that any man daring to go into print with such a self-pitying litany of woe would have faced a barrage of scorn about "man flu" and men's general inferiority when it comes to tolerating illness.
On Friday Sarah's back. She's getting better but now her husband, Michael Gove, is ailing, so Sarah decides to try the new emergency phone line -- which she finds seriously wanting. She compares the questioning she receives to a "survey" and slags off the operator for stumbling over terms like "Relenza" and cystic fibrosis. It's condescending almost to the point of being downright offensive. Sarah also recounts the story of a hypochondriac friend who calls the emergency line and, through strategic lying -- porkies about swine flu -- manages to get a dose of Tamiflu that she almost certainly doesn't need.
Sarah is mortified at having to deal with amateurs, thinks "at a minimum" that the emergency line should be staffed by nurses. Precisely where the NHS is supposed to find enough nurses to take this on isn't readily apparent. In any case, I'd have thought the NHS has better uses for its trained professionals than to have them talking on the phone to mendacious hypochondriac friends of Sarah Vine, or to Sarah herself, for that matter.
Needless to say, it's been good for a lot of copy. At the start of last week, the Times gave two whole pages to Sarah bemoaning how ill she'd been, how the Tamiflu made her throw up, and how unbearable the whole experience would have been if she hadn't had a child minder. In fairness, she does seem to have been quite ill, though I can't help thinking that any man daring to go into print with such a self-pitying litany of woe would have faced a barrage of scorn about "man flu" and men's general inferiority when it comes to tolerating illness.
On Friday Sarah's back. She's getting better but now her husband, Michael Gove, is ailing, so Sarah decides to try the new emergency phone line -- which she finds seriously wanting. She compares the questioning she receives to a "survey" and slags off the operator for stumbling over terms like "Relenza" and cystic fibrosis. It's condescending almost to the point of being downright offensive. Sarah also recounts the story of a hypochondriac friend who calls the emergency line and, through strategic lying -- porkies about swine flu -- manages to get a dose of Tamiflu that she almost certainly doesn't need.
Sarah is mortified at having to deal with amateurs, thinks "at a minimum" that the emergency line should be staffed by nurses. Precisely where the NHS is supposed to find enough nurses to take this on isn't readily apparent. In any case, I'd have thought the NHS has better uses for its trained professionals than to have them talking on the phone to mendacious hypochondriac friends of Sarah Vine, or to Sarah herself, for that matter.
Wednesday, 15 July 2009
The grey greedies
The government has finally unveiled three options for reforming the way care for the elderly is financed in England. Each of the proposals attempts to address the perceived unfairness of the present system, under which those with financial assets above a relatively modest level (currently about £22,000) are expected to pay for their own car, while those with less money get government help. It's unlikely that there will be any changes made before the general election.
As I've written here before, I've had personal experience of how the present system works in the last couple of years. When my aunt had to go into care, a quick tally of her assets revealed that she had less than the threshold level, so her care was almost fully paid for by the state. In my mother's case, her assets were above the threshold, so she had to pay for her own care. In both cases the care was excellent.
I didn't and still don't find the principle here objectionable, although the £22,000 figure seems rather arbitrary and possibly open to abuse. Many years ago a neighbour of my mother's was looking for help with care costs and was found to be just over whatever limit applied in those days. The social worker advised him to splash out on a round-the-world cruise and apply again when he got back. (He indignantly declined to do so).
But a lot of people do seem to object in principle. One lady quoted in the press this week thought her father should get free care because "he spent 34 years in the RAF", which I would have thought was relevant only if he was (a) conscripted and (b) unpaid. (Still, 34 years?? Even Biggles didn't manage that). Mostly, though, the objections centre on the need for the elderly to sell their homes to pay for care costs. The RAF gent's daughter, herself in her 60s, came right out and said it: when the time comes that she needs care, she wants the taxpayer to fork out for it, so that she can pass her home on to her daughter!
There is no basic human right to pass the family home onto your descendants while asking other people, who may well be worse off than you, to pay your bills. If you insist on that, you're not just asking the state to pay for your care: you're asking it to buy your house from you and give it to your heirs. Many people who end up in care homes spend a decade or more living there: are their family homes to be allowed to sit empty for all that time so that the heirs can claim them when their loved one finally passes on? If that's the case, given the aging population and rising life expectancies, we could have a large proportion of the country's housing stock sitting idle before too long. Then, I'd guess, there will be pressure to allow the putative heirs to move in even before the death of their relative. Ah, the British obsession with home ownership!
A couple of decades ago, New Zealand ran into severe budget problems and was forced into radical spending cuts. The biggest objections came from the cosily entitled elderly, but the Government was in such dire straits that it had no choice but to face them down. They became stigmatised as the "grey greedies". The care issue is likely to be only one among many where the grey greedies try to throw their weight about in the UK in the next few years. This particular greybeard won't be joining them.
As I've written here before, I've had personal experience of how the present system works in the last couple of years. When my aunt had to go into care, a quick tally of her assets revealed that she had less than the threshold level, so her care was almost fully paid for by the state. In my mother's case, her assets were above the threshold, so she had to pay for her own care. In both cases the care was excellent.
I didn't and still don't find the principle here objectionable, although the £22,000 figure seems rather arbitrary and possibly open to abuse. Many years ago a neighbour of my mother's was looking for help with care costs and was found to be just over whatever limit applied in those days. The social worker advised him to splash out on a round-the-world cruise and apply again when he got back. (He indignantly declined to do so).
But a lot of people do seem to object in principle. One lady quoted in the press this week thought her father should get free care because "he spent 34 years in the RAF", which I would have thought was relevant only if he was (a) conscripted and (b) unpaid. (Still, 34 years?? Even Biggles didn't manage that). Mostly, though, the objections centre on the need for the elderly to sell their homes to pay for care costs. The RAF gent's daughter, herself in her 60s, came right out and said it: when the time comes that she needs care, she wants the taxpayer to fork out for it, so that she can pass her home on to her daughter!
There is no basic human right to pass the family home onto your descendants while asking other people, who may well be worse off than you, to pay your bills. If you insist on that, you're not just asking the state to pay for your care: you're asking it to buy your house from you and give it to your heirs. Many people who end up in care homes spend a decade or more living there: are their family homes to be allowed to sit empty for all that time so that the heirs can claim them when their loved one finally passes on? If that's the case, given the aging population and rising life expectancies, we could have a large proportion of the country's housing stock sitting idle before too long. Then, I'd guess, there will be pressure to allow the putative heirs to move in even before the death of their relative. Ah, the British obsession with home ownership!
A couple of decades ago, New Zealand ran into severe budget problems and was forced into radical spending cuts. The biggest objections came from the cosily entitled elderly, but the Government was in such dire straits that it had no choice but to face them down. They became stigmatised as the "grey greedies". The care issue is likely to be only one among many where the grey greedies try to throw their weight about in the UK in the next few years. This particular greybeard won't be joining them.
Monday, 13 July 2009
Regulating the City of London
The UK government's plans for regulatory reform in the financial sector seem to have impressed nobody. Both of the main opposition parties favour returning the prime responsibility for regulation to the Bank of England, but the government wants to persist with the so-called "tripartite" system. In fact, you could say it wants to make it even more complicated, with a co-ordinating body to be set up to ensure that the Treasury, Bank of England and FSA work together.
I'm agnostic about the tripartite system and doubt whether the hiving-off of the FSA had much to do with the recent crisis. There's no reason that a free-standing bank regulator can't work perfectly well. For example, Canada's big banks have been almost unscathed by the global credit crisis, and they're regulated by a single-purpose body (The Office of the Superintendent of Financial Institutions, or OSFI) rather than by the Bank of Canada.
If simplicity was the key to successful financial regulation, as the opponents of the tripartite system seem to believe, Canadian markets would be in a state of perpetual chaos. As well as the Bank of Canada and OSFI, each of the ten Provinces has traditionally maintained its own securities commission. But it all seems to work, at least well enough to avoid most crises and to deal promptly and effectively with those that do occur.
The biggest event in Canadian banking in the last fifty years was something that didn't happen. In 1998 four of the big five banks announced plans to merge: Royal Bank with Bank of Montreal and Toronto Dominion with CIBC. Both pairings argued that they were too small to compete internationally, an argument that was rather undermined by the fact that at the time, each bank was using big chunks of its existing capital to finance repurchases of its own stock. The Government had no advance warning of the plans, but kept the banks waiting for almost nine months before announcing its decision: the mergers were not in the public interest and would not be allowed to proceed.
You can agree or disagree with that decision (and at least up until the start of the credit crunch, senior bankers would still moan about it regularly) but it clearly showed the determination of the government to maintain a high degree of national influence over a key sector of the economy. It's impossible to imagine any UK government for the last two decades or more taking a similar step. Politicians and regulators alike have appeared to be in thrall to the City of London, regularly extolling (and even trying to take credit for) its undoubted success as one of the UK's few world-class sectors.
There was some tough rhetoric about cracking down on the perceived excesses of the banks and hedgies and all the rest in the early days of the credit crunch. However, I don't see much evidence of follow-through in the government's proposals. Politicians are still in awe of the big money types and fret about driving away the perceived wealth and jobs that the City brings, despite the explosion in the other side of the ledger in the past two years: the tens of thousands of jobs shed by the banks themselves, the destruction of jobs throughout the economy as a result of the drying-up of credit, and of course the potentially huge cost of bank bailouts to the public purse.
Most of the activities in the City have very little to do with the UK economy, but there's no denying that the jobs and wealth they bring are very welcome. Before the credit crunch, the City had grown too big for the UK economy, but when the crunch came, this meant that the whole edifice was too big to fail. There's very little sense in a financial regulatory system that puts the domestic banking system at risk when investment banks overstretch themselves internationally. The Canadian government, by luck or good judgment, kept its domestic banks out of trouble by refusing mergers that would have allowed them to go head to head with the big international banks. Right now, the UK government needs to take a comparably bold step by separating bread-and-butter day-to-day banking from investment finance. By all means have a regulatory regime that encourages financiers to set up shop here, but don't do so in such a way as to put domestic financial stability at risk.
I'm agnostic about the tripartite system and doubt whether the hiving-off of the FSA had much to do with the recent crisis. There's no reason that a free-standing bank regulator can't work perfectly well. For example, Canada's big banks have been almost unscathed by the global credit crisis, and they're regulated by a single-purpose body (The Office of the Superintendent of Financial Institutions, or OSFI) rather than by the Bank of Canada.
If simplicity was the key to successful financial regulation, as the opponents of the tripartite system seem to believe, Canadian markets would be in a state of perpetual chaos. As well as the Bank of Canada and OSFI, each of the ten Provinces has traditionally maintained its own securities commission. But it all seems to work, at least well enough to avoid most crises and to deal promptly and effectively with those that do occur.
The biggest event in Canadian banking in the last fifty years was something that didn't happen. In 1998 four of the big five banks announced plans to merge: Royal Bank with Bank of Montreal and Toronto Dominion with CIBC. Both pairings argued that they were too small to compete internationally, an argument that was rather undermined by the fact that at the time, each bank was using big chunks of its existing capital to finance repurchases of its own stock. The Government had no advance warning of the plans, but kept the banks waiting for almost nine months before announcing its decision: the mergers were not in the public interest and would not be allowed to proceed.
You can agree or disagree with that decision (and at least up until the start of the credit crunch, senior bankers would still moan about it regularly) but it clearly showed the determination of the government to maintain a high degree of national influence over a key sector of the economy. It's impossible to imagine any UK government for the last two decades or more taking a similar step. Politicians and regulators alike have appeared to be in thrall to the City of London, regularly extolling (and even trying to take credit for) its undoubted success as one of the UK's few world-class sectors.
There was some tough rhetoric about cracking down on the perceived excesses of the banks and hedgies and all the rest in the early days of the credit crunch. However, I don't see much evidence of follow-through in the government's proposals. Politicians are still in awe of the big money types and fret about driving away the perceived wealth and jobs that the City brings, despite the explosion in the other side of the ledger in the past two years: the tens of thousands of jobs shed by the banks themselves, the destruction of jobs throughout the economy as a result of the drying-up of credit, and of course the potentially huge cost of bank bailouts to the public purse.
Most of the activities in the City have very little to do with the UK economy, but there's no denying that the jobs and wealth they bring are very welcome. Before the credit crunch, the City had grown too big for the UK economy, but when the crunch came, this meant that the whole edifice was too big to fail. There's very little sense in a financial regulatory system that puts the domestic banking system at risk when investment banks overstretch themselves internationally. The Canadian government, by luck or good judgment, kept its domestic banks out of trouble by refusing mergers that would have allowed them to go head to head with the big international banks. Right now, the UK government needs to take a comparably bold step by separating bread-and-butter day-to-day banking from investment finance. By all means have a regulatory regime that encourages financiers to set up shop here, but don't do so in such a way as to put domestic financial stability at risk.
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