Last evening I caught some of Sky News's coverage of the tsunami watch in Hawaii -- lots of shots of people in shorts, sitting on a cliff with a brew or two, watching the very ordinary surf rolling in. Suddenly they cut away to a "Fox News affiliate in Long Beach, California". Over a shot of a muddy little harbour no bigger than my back garden, the reporter breathlessly announced that the approaching tsunami had caused the water level to sink so far that the small boat in the harbour was no longer floating. He handed off to a local meteorologist, who promptly pointed out that the reason for the absence of water was that it was low tide at Long Beach!
Then today I came across this masterpiece in an opinion piece about the railways by the new business editor of the Sunday Times, Dominic O'Connell:
The Department for Transport’s role was to co-ordinate the big picture, so we weren’t left with orphan fleets that weren’t wanted.
That wasn’t enough for the department, however. It wanted to get involved in the nitty-gritty, and instituted a grand plan to replace the trains used on the West Coast and East Coast main lines. There were schemes for hybrid trains (ones with diesel and electric motors working in concert).
In the meantime, the policy goalposts have shifted, and the government is likely to spend money electrifying one or more of the routes.
There can only be a few sentient people in the UK who are unaware that both the East Coast and West Coast main lines are already electrified. It's amazing that one of those few has wound up as business editor of the Sunday Times.
Fox, Sky and the Sunday Times are all owned by News Corporation. Imagine the quality of reportage we can look forward to if Rupert Murdoch succeeds in his plan to eviscerate the BBC.
Sunday, 28 February 2010
Saturday, 27 February 2010
Tirelessly Implementing Murdoch's Evil Schemes
Pre-emptive surrender is never a good idea. This week the Times filled its front page with a leaked BBC report about future cutbacks at the Corporation. In an effort to fend off changes imposed by a future Tory government -- changes in no way related, of course, to the Murdoch empire's switch of support from Labour to the Tories -- the BBC is planning cuts of its own. Two radio stations (BBC6 and Asian) will go, and the Corporation's excellent website will be scaled back drastically. Several hundred jobs are to go, which has predictably got the unions in a lather.
The Times's response to the Beeb's self-mutilation was an editorial headed "Big, Bloated and Cunning" (geddit?). Evidently the proposed changes don't go nearly far enough to satisfy the Murdoch agenda. According to The Times, the BBC should go back to focusing on what it does best. Well, let's see. BBC News is much better than Sky News, which has dumbed down dramatically in recent years. The same goes for the two companies' websites. The BBC's independent TV drama productions are much better than Sky's, if only because Sky basically can't be arsed doing anything of that sort. In terms of promoting new music, BBC TV and radio have a proud track record that will be severely compromised if BBC 6 Music is closed; what does Sky do in this field? The only thing I can think of where Sky is better than the BBC is in its football coverage, but that's just because I don't like John Motson.
The BBC costs about as much for a full year as a comprehensive Sky subscription costs for less than three months. It's only reasonable that the BBC should share the burden of the inevitable public sector cost-cutting that lies ahead. But wholesale cuts in order to placate and further enrich a rapacious foreign businessman are something else entirely.
The Times's response to the Beeb's self-mutilation was an editorial headed "Big, Bloated and Cunning" (geddit?). Evidently the proposed changes don't go nearly far enough to satisfy the Murdoch agenda. According to The Times, the BBC should go back to focusing on what it does best. Well, let's see. BBC News is much better than Sky News, which has dumbed down dramatically in recent years. The same goes for the two companies' websites. The BBC's independent TV drama productions are much better than Sky's, if only because Sky basically can't be arsed doing anything of that sort. In terms of promoting new music, BBC TV and radio have a proud track record that will be severely compromised if BBC 6 Music is closed; what does Sky do in this field? The only thing I can think of where Sky is better than the BBC is in its football coverage, but that's just because I don't like John Motson.
The BBC costs about as much for a full year as a comprehensive Sky subscription costs for less than three months. It's only reasonable that the BBC should share the burden of the inevitable public sector cost-cutting that lies ahead. But wholesale cuts in order to placate and further enrich a rapacious foreign businessman are something else entirely.
Monday, 22 February 2010
Another irresponsible bribe
The election campaign isn't even officially under way yet, but we've already been treated to dumb, populist ideas by both of the major parties. A few weeks ago Labour announced its uncosted "free care at home" wheeze, which has appalled both the other parties and health care professionals. Now the Tories have upped (or is that downed?) the ante with a scheme to give shares in the nationalised banks to members of the public at a knockdown price.
The idea is that once the banks have been cleaned up ready for sale back to private investors, some of the shares will be offered to members of the public at a below market price. Tory Shadow Chancellor George Osborne calls this "the people's bank bonus", a way of paying back taxpayers for the risk they took in rescuing the banks. Problem is, every taxpayer took on those risks, but the only ones who will benefit from George's little bonus pool are those who can afford to pay for their piece of the pie -- who will, of course, be predominantly Tory-leaning middle-class voters. Whereas, of course, if all the shares were sold at full market value, the public purse, and hence all taxpayers regardless of their means, would reap the maximum benefit. By all means arrange the sale so that some shares are reserved for retail investors; but there's no good case for giving them away cheap.
This "initiative" and Labour's care at home scheme have something in common. They're both blatant bribes that the country can ill afford. Both would transfer money from all taxpayers, including the poor, to middle-class voters. This looks like being a truly depressing election.
The idea is that once the banks have been cleaned up ready for sale back to private investors, some of the shares will be offered to members of the public at a below market price. Tory Shadow Chancellor George Osborne calls this "the people's bank bonus", a way of paying back taxpayers for the risk they took in rescuing the banks. Problem is, every taxpayer took on those risks, but the only ones who will benefit from George's little bonus pool are those who can afford to pay for their piece of the pie -- who will, of course, be predominantly Tory-leaning middle-class voters. Whereas, of course, if all the shares were sold at full market value, the public purse, and hence all taxpayers regardless of their means, would reap the maximum benefit. By all means arrange the sale so that some shares are reserved for retail investors; but there's no good case for giving them away cheap.
This "initiative" and Labour's care at home scheme have something in common. They're both blatant bribes that the country can ill afford. Both would transfer money from all taxpayers, including the poor, to middle-class voters. This looks like being a truly depressing election.
Not the comfy cushions!
Stephen Fry once defined the word "countryside" as "killing Piers Morgan". I'm with Fry on that one, so I didn't watch Morgan's recent interview with Gordon Brown. Lots of people did, though, and the interview is being credited with giving Labour a lift in the opinion polls.
Which is pretty amazing. Morgan confessed to Rod Liddle over the weekend that they taped over two and a half hours of material. Then for broadcast purposes they cut out all the political stuff, leaving only the scenes of the PM tearing up over the death of his daughter, and cutaways of Mrs Brown looking on sympathetically.
Now there's word that David Cameron wants the chance to show his human side to the public. His chosen interviewer is....Alan Titchmarsh. Since the Camerons also lost a young child to illness, the cynics in Smith Square are no doubt assuming that Cameron will be able to achieve a poll boost of his own, and maybe pick up a few tips on rose pruning along the way. No word yet from LibDem leader Nick Clegg; maybe he's trying to decide between an interview by that bloke off Antiques Roadshow, or a fangs-bared confrontation with Michael Parkinson.
Sadly, the election campaign is likely to bring more of this pap, since about two-thirds of voters seem to approve of politicians baring their souls in a carefully-controlled environment. Me, I want to see Brown getting eviscerated by Jeremy Paxman, Cameron mullered by John Humphrys and Clegg hectored by Jeremy Vine. But it looks as if policies may turn out to be the last thing this year's election is about.
Which is pretty amazing. Morgan confessed to Rod Liddle over the weekend that they taped over two and a half hours of material. Then for broadcast purposes they cut out all the political stuff, leaving only the scenes of the PM tearing up over the death of his daughter, and cutaways of Mrs Brown looking on sympathetically.
Now there's word that David Cameron wants the chance to show his human side to the public. His chosen interviewer is....Alan Titchmarsh. Since the Camerons also lost a young child to illness, the cynics in Smith Square are no doubt assuming that Cameron will be able to achieve a poll boost of his own, and maybe pick up a few tips on rose pruning along the way. No word yet from LibDem leader Nick Clegg; maybe he's trying to decide between an interview by that bloke off Antiques Roadshow, or a fangs-bared confrontation with Michael Parkinson.
Sadly, the election campaign is likely to bring more of this pap, since about two-thirds of voters seem to approve of politicians baring their souls in a carefully-controlled environment. Me, I want to see Brown getting eviscerated by Jeremy Paxman, Cameron mullered by John Humphrys and Clegg hectored by Jeremy Vine. But it looks as if policies may turn out to be the last thing this year's election is about.
Tuesday, 16 February 2010
Stop me before I lend again
Considering the mayhem caused by the credit crisis and the massive costs visited upon taxpayers, the world's banks are doing an amazing job of fending off significant changes in regulation. The UK, one of the worst-hit jurisdictions, has not done much beyond imposing a one-time tax on bankers' bonuses, which has hardly caused a hiccup in the payments, let alone changed the banks' behaviour. President Obama has proposed a drastic back-to-the-future re-regulation of US banks, but the so-called Volcker Plan is already being dismissed as "dead in the water" by many pundits. Nobody else even seems to be trying very hard.
How about this, though? Canada has today announced a tightening in rules for residential mortgage financing. You can read the details on the Finance Canada website here. There's nothing too drastic about the specific rules, although the requirement for all new borrowers to show that they could afford a 5-year fixed rate mortgage, even if they are actually taking out a short term floater, would certainly have made a difference in the UK and US if it had been in place before the crunch hit. But what's really interesting about these rules is that the banks themselves lobbied the Government to impose them! Yes, really. As a result of the low interest rates put in place to combat the credit crisis, Canadian house prices have been on a roll, rising about 18% in the past year. None of the major banks wanted to be the first to quit the arena, but as a group they were smart enough to go the government and suggest a gentle tightening of the rules.
Not like the UK, is it? Here, banks are racking up massively higher profits on the back of cheap funding from taxpayers, while continuing to squeeze both mortgage and small business lending. They're issuing apocalyptic warnings about the dire consequences of any meddling in their affairs while quietly making plans to move more of their operations to "friendlier" jurisdictions. Now, Moody's is warning of a second credit crunch, and a renewed fall in house prices, when Government funding of the banks starts to be withdrawn at the beginning of 2011. If taxpayers and borrowers were starting to wonder what they had got in return for bailing the banks out, you couldn't really blame them, could you?
How about this, though? Canada has today announced a tightening in rules for residential mortgage financing. You can read the details on the Finance Canada website here. There's nothing too drastic about the specific rules, although the requirement for all new borrowers to show that they could afford a 5-year fixed rate mortgage, even if they are actually taking out a short term floater, would certainly have made a difference in the UK and US if it had been in place before the crunch hit. But what's really interesting about these rules is that the banks themselves lobbied the Government to impose them! Yes, really. As a result of the low interest rates put in place to combat the credit crisis, Canadian house prices have been on a roll, rising about 18% in the past year. None of the major banks wanted to be the first to quit the arena, but as a group they were smart enough to go the government and suggest a gentle tightening of the rules.
Not like the UK, is it? Here, banks are racking up massively higher profits on the back of cheap funding from taxpayers, while continuing to squeeze both mortgage and small business lending. They're issuing apocalyptic warnings about the dire consequences of any meddling in their affairs while quietly making plans to move more of their operations to "friendlier" jurisdictions. Now, Moody's is warning of a second credit crunch, and a renewed fall in house prices, when Government funding of the banks starts to be withdrawn at the beginning of 2011. If taxpayers and borrowers were starting to wonder what they had got in return for bailing the banks out, you couldn't really blame them, could you?
Thursday, 11 February 2010
Nice story, shame about the facts
I was amazed to find former Canadian Finance Minister (and, ever so briefly, PM) Paul Martin being interviewed on BBC News's HardTalk last evening. The interviewer was probing him about Canada's success in curbing its fiscal deficit in the 1990s, which is still being cited as a precedent/example for the UK.
I've blogged about this before, because it's a total crock. Here's a lengthy extract from something I wrote on the subject on 7 July 2009:
There was certainly a slowdown in total spending in the mid-1990s, but it lasted only two years. What's more, the Government can't take a whole lot of credit for it. The dollar value of the fall in total spending from 1996 to 1998 was C$ 12.4 bn; of this, C$ 6.3 bn, or more than half, was accounted for by debt servicing costs, for which much thanks Alan Greenspan. Almost all of the rest (C$ 5.6 bn) was accounted for by reduced transfers to other governments -- provinces and municipalities. In effect the federal Government sought to alleviate its own problems by starving the provinces of cash. It's hard to see much of an example for the UK here. In any case, by the end of the decade all the major spending categories, even transfers to Provinces, were above their 1991 levels. Only debt service costs had actually declined in dollar terms (and continued to do so at the start of the current decade).
What about revenues? Well, these were largely stagnant at the start of the 1990s, because the North American economies were in recession. After that they took off, thanks to economic growth and tax measures. From 1991 to 2001, tax revenues rose by a total of 62%. If you want to know how Canada eliminated its chronic fiscal deficits and moved into reasonably sustainable surplus by the start of the current decade (though it's back in deficit now), you need to look no further than this.
I don't mean to belittle Martin's achievement. Previous Finance Ministers of both major parties had made a big song-and-dance about cutting the deficit for years, without ever actually doing it. Martin saw both an opportunity and the need to fix the problem, and simply did it. (Canada has now slipped back into deficit again, under a right-wing government). But the supposed lessons for the UK escape me entirely. Consider:
* Martin benefited from falling interest rates for most of the 1990s, which cut debt servicing costs and boosted revenues. There's no scope for lower rates in the UK in the next few years.
* Canada's economy was boosted by strong growth in its dominant trading partner, the US, during the decade of fiscal adjustment. It's hard to see where the UK can look for that sort of helping hand.
* the only category of spending that Canada truly cut was transfers to Provinces, which is not an option in the UK. (That said, Gordon Brown's attempts to force local authorities to find the funding for his insane care-at-home scheme may be a clue to how Labour will find "cuts" if it gets re-elected).
In the end cutting Canada's deficit proved surprisingly easy -- after just a couple of years Martin was routinely lying about how strong Canada's fiscal position was, in order to fend off demands for higher spending or tax cuts. But that's not to say it was pleasant. Living standards were largely stagnant through the 1990s, which caused a great deal of grumbling and ultimately cost Martin's Liberals an election. In the almost certain absence of the factors that made it easy for Canada -- strong growth elsewhere and falling interest rates -- the UK is likely to find the whole process a lot less agreeable.
I don't think I'm going to write about the "Canadian example" any more. The mythology is too well established.
I've blogged about this before, because it's a total crock. Here's a lengthy extract from something I wrote on the subject on 7 July 2009:
There was certainly a slowdown in total spending in the mid-1990s, but it lasted only two years. What's more, the Government can't take a whole lot of credit for it. The dollar value of the fall in total spending from 1996 to 1998 was C$ 12.4 bn; of this, C$ 6.3 bn, or more than half, was accounted for by debt servicing costs, for which much thanks Alan Greenspan. Almost all of the rest (C$ 5.6 bn) was accounted for by reduced transfers to other governments -- provinces and municipalities. In effect the federal Government sought to alleviate its own problems by starving the provinces of cash. It's hard to see much of an example for the UK here. In any case, by the end of the decade all the major spending categories, even transfers to Provinces, were above their 1991 levels. Only debt service costs had actually declined in dollar terms (and continued to do so at the start of the current decade).
What about revenues? Well, these were largely stagnant at the start of the 1990s, because the North American economies were in recession. After that they took off, thanks to economic growth and tax measures. From 1991 to 2001, tax revenues rose by a total of 62%. If you want to know how Canada eliminated its chronic fiscal deficits and moved into reasonably sustainable surplus by the start of the current decade (though it's back in deficit now), you need to look no further than this.
I don't mean to belittle Martin's achievement. Previous Finance Ministers of both major parties had made a big song-and-dance about cutting the deficit for years, without ever actually doing it. Martin saw both an opportunity and the need to fix the problem, and simply did it. (Canada has now slipped back into deficit again, under a right-wing government). But the supposed lessons for the UK escape me entirely. Consider:
* Martin benefited from falling interest rates for most of the 1990s, which cut debt servicing costs and boosted revenues. There's no scope for lower rates in the UK in the next few years.
* Canada's economy was boosted by strong growth in its dominant trading partner, the US, during the decade of fiscal adjustment. It's hard to see where the UK can look for that sort of helping hand.
* the only category of spending that Canada truly cut was transfers to Provinces, which is not an option in the UK. (That said, Gordon Brown's attempts to force local authorities to find the funding for his insane care-at-home scheme may be a clue to how Labour will find "cuts" if it gets re-elected).
In the end cutting Canada's deficit proved surprisingly easy -- after just a couple of years Martin was routinely lying about how strong Canada's fiscal position was, in order to fend off demands for higher spending or tax cuts. But that's not to say it was pleasant. Living standards were largely stagnant through the 1990s, which caused a great deal of grumbling and ultimately cost Martin's Liberals an election. In the almost certain absence of the factors that made it easy for Canada -- strong growth elsewhere and falling interest rates -- the UK is likely to find the whole process a lot less agreeable.
I don't think I'm going to write about the "Canadian example" any more. The mythology is too well established.
Friday, 5 February 2010
PIGS in doo-doo
Big falls in global stock markets, led by bank shares; ballooning spreads for credit default swaps (yes, alas, they do still exist); a flight to the perceived safety of the US dollar. It's deja vu, or at least 2008, all over again, but this time the focus of the markets' angst, or of the hedgies' mischief making, depending on which way you like to look at it, isn't the health of the global financial system. It's sovereign debt, and particularly the fiscal crisis in the EU's southern tier, notably Portugal, Greece and Spain. (Is the fourth of the PIGS Italy or Ireland? Discuss.)
The fact is, this latest crisis is not just about markets expressing a view on excessive government debt. If it were, it would make no sense for investors to seek safety in the Yen (Japan has long had one of the highest public debt-GDP ratios in the world) or the US dollar (the US is in its worst fiscal mess for generations and seems to have become at least as ungovernable as Greece or Portugal; and don't even mention the virtual bankruptcy of California). Yet that flight to "quality" has been much in evidence this week. Investors think they can trust the governments in Washington and Tokyo, but they're not at all sure about the EU. This is a crisis for the Eurozone, which up until recently seemed to have ridden out the global credit crisis with very little fuss.
The problem that has investors worried is that nobody is completely clear about the lines of responsibility within the EU for dealing with this crisis. The once-famous Maatricht criteria for admission to the single currency quickly fell into abeyance as each country joined the club. (Not that the criteria were ever that strictly enforced -- not long before the Euro was adopted, the only country in full compliance with the Maastricht rules was Luxembourg). Fiscal policy has remained under the control of national governments, and the ECB is forbidden to bail them out, though this has not prevented the bank from joining in with the global trend toward "quantitative easing".
Since markets began to fixate on the debt problems in Greece a few weeks ago, official pronouncements from within the EU have been unhelpful. One media commentator described the EU's attitude to the emerging crisis as "of course we'll help the Greeks, but don't tell the Greeks that". Even less constructively, ECB President Trichet suggested that admission to the Eurozone had conveyed all kinds of upfront benefits on countries such as Greece, and they could expect no help now if they had allowed things to go wrong.
This week the EU and ECB have had to pull back from Trichet's inflexible position, placing Greece on a sort of internal watchlist. However, the Greek government's efforts to get its fiscal house in order, which include reducing the budget deficit to the long-neglected Maastricht target of 3% of GDP by 2012, have provoked serious labour unrest. This has led markets to shift their focus onto Spain and Portugal, whose fiscal position is comparable to that of Greece, and where prospects for a smooth process of fiscal adjustment are equally dim. This is especially so in the case of Portugal, where a Trotskyite party won 10% of the vote in last year's national elections.
Greece should have been a minor and manageable issue for the EU, but because it failed to deal with it quickly and effectively it now has to cope with a larger and potentially much more intractable problem in the shape of Spain. Markets fear that in the worst case, the crisis could even spread into the heart of the original EU -- well, into Italy -- and put the whole Eurozone, and the single currency itself, at risk. That still seems far-fetched, but not nearly as much as it did a few weeks ago. Still, it's nice to have the focus move away from the UK's debt problems for a while -- though I suspect that relief will not last long.
The fact is, this latest crisis is not just about markets expressing a view on excessive government debt. If it were, it would make no sense for investors to seek safety in the Yen (Japan has long had one of the highest public debt-GDP ratios in the world) or the US dollar (the US is in its worst fiscal mess for generations and seems to have become at least as ungovernable as Greece or Portugal; and don't even mention the virtual bankruptcy of California). Yet that flight to "quality" has been much in evidence this week. Investors think they can trust the governments in Washington and Tokyo, but they're not at all sure about the EU. This is a crisis for the Eurozone, which up until recently seemed to have ridden out the global credit crisis with very little fuss.
The problem that has investors worried is that nobody is completely clear about the lines of responsibility within the EU for dealing with this crisis. The once-famous Maatricht criteria for admission to the single currency quickly fell into abeyance as each country joined the club. (Not that the criteria were ever that strictly enforced -- not long before the Euro was adopted, the only country in full compliance with the Maastricht rules was Luxembourg). Fiscal policy has remained under the control of national governments, and the ECB is forbidden to bail them out, though this has not prevented the bank from joining in with the global trend toward "quantitative easing".
Since markets began to fixate on the debt problems in Greece a few weeks ago, official pronouncements from within the EU have been unhelpful. One media commentator described the EU's attitude to the emerging crisis as "of course we'll help the Greeks, but don't tell the Greeks that". Even less constructively, ECB President Trichet suggested that admission to the Eurozone had conveyed all kinds of upfront benefits on countries such as Greece, and they could expect no help now if they had allowed things to go wrong.
This week the EU and ECB have had to pull back from Trichet's inflexible position, placing Greece on a sort of internal watchlist. However, the Greek government's efforts to get its fiscal house in order, which include reducing the budget deficit to the long-neglected Maastricht target of 3% of GDP by 2012, have provoked serious labour unrest. This has led markets to shift their focus onto Spain and Portugal, whose fiscal position is comparable to that of Greece, and where prospects for a smooth process of fiscal adjustment are equally dim. This is especially so in the case of Portugal, where a Trotskyite party won 10% of the vote in last year's national elections.
Greece should have been a minor and manageable issue for the EU, but because it failed to deal with it quickly and effectively it now has to cope with a larger and potentially much more intractable problem in the shape of Spain. Markets fear that in the worst case, the crisis could even spread into the heart of the original EU -- well, into Italy -- and put the whole Eurozone, and the single currency itself, at risk. That still seems far-fetched, but not nearly as much as it did a few weeks ago. Still, it's nice to have the focus move away from the UK's debt problems for a while -- though I suspect that relief will not last long.
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