Olympic notebook

* The standout moment of the Olympic Games (so far) hasn't come in any of the official events. There are two strong candidates: Culture Minister Jeremy Hunt's attempt at murder by flying bell, and the inadvertent (but repeated) Nazi salute by one of the German IOC delegation as his country's team entered the stadium during the opening ceremony.  The winner has to be bell-tosser Hunt, who thoroughly deserves anything bad that befalls him -- a view evidently shared by whoever it was that saw fit to tamper with his instrument. (It can't have been just an accident, can it?)  The German gent is, by all accounts, a decent cove who behaved with great courage during the atrocities at the Munich Olympics.

* Just a couple of weeks ago, when it was announced that tickets to the women's football competition had not all been sold, LOCOG supremo Lord Coe appeared on TV to smirk confidently that "there certainly won't be any swathes of empty seats at Olympic events, don't you worry about that".  Well, on day 1 of full Olympic competition, there were swathes of empty seats at venues for all kinds of events -- swimming, tennis, equestrianism and more.  The aforementioned Jeremy Hunt went on TV to blame....the sponsors! Apparently all those empty seats had been allocated to LOCOG's army of sponsors, who hadn't realised that they were supposed to provide bottoms to fill them.  Ordinary folk who competed in endless, poorly-organised ballots yet failed to get tickets are mightily (and justly) aggrieved. **

* The empty seats furore is the latest example of an event in which LOCOG and its friends in the Government seem certain to win the gold medal: buck passing.  LOCOG can't really do anything about the sponsors because it sold the soul of the Games to them a long time ago and has allowed them a bizarre and quite possibly illegal monopoly on services.  (Two examples among many: you can't use Mastercard or Amex in the Olympic Park, because Visa is a sponsor; and if you dare to wear anything with a Pepsi logo to any events, you may be denied entry, because Coca Cola is a sponsor).  Or think back a couple of weeks to the security meltdown:  all the fault of the contractor, G4S, apparently. No blame attached to LOCOG,  either for possibly picking the wrong company in the first place, or for drastically underestimating the scale of security it needed until late in the day.  

* It's early days, but I just have a bit of a queasy feeling that the UK medal count may come up a bit short of the media's inflated expectations.  A lot of hope is riding on the people who performed so brilliantly in Beijing four years ago -- Rebecca Adlington, Victoria Pendleton, Phillips Idowu and so on -- yet it's actually quite unusual for athletes to be able to carry over the very top level of performance from one Olympiad to another.     I hope I'm wrong, and as the UK specialties (the so-called sitting down sports like cycling, rowing and equestrianism) aren't yet in full swing, maybe I am.

* The head of UK Athletics, Charles van Commenee, seems to be a very unpleasant man.   Maybe we can sic Jeremy Hunt on him.

** UPDATE 30 July: this one will run and run! Evidently someone has suggested quietly to Lord Coe that it's not a good idea to diss the paymasters, so he's no longer blaming the sponsors for the empty seats.  Now it's all down to Olympic officials failing to turn up and use seats reserved for them.  Judging from the number of vacant places in the last two days, there must be a huge number of these folk.  In the meantime, students and the military (when they're not too busy providing security) will be deployed to fill the seats and spare LOCOG's blushes. I seem to recall that some smart person warned us a long time ago that this would happen.  Oh, that's tight -- this guy.

Bad data

The initial estimate for UK Q2 GDP that was released by the ONS this morning makes gruesome reading. (BBC story here).  GDP fell by 0.7% in the quarter, much worse than expected, to stand 0.8% below its year-ago level.  Construction, production industries (including manufacturing) and even services all posted lower output for the quarter.

And yet....the ONS has been forced to admit that its figures are even more unreliable than usual.  It is unable to quantify the impact of either the extra holiday for the Queen's Jubilee, or the abysmal weather throughout the quarter, on the recorded figures.  It seems very likely that the underlying growth trend in the economy, though very far from strong, is nowhere near as weak as these numbers suggest.  That's certainly what the steady growth in employment seems to indicate.  It's increasingly hard to fathom quite why the ONS feels compelled to offer these early and fundamentally unreliable estimates of GDP, rather than adopting a reporting schedule that affords it (and investors and the public) a greater degree of accuracy and certainty.  

Unfortunately there is one important data series that does seem to be consistent with the weak GDP data.  So far this fiscal year, UK public sector borrowing is running above last year's levels, and the data would be even worse but for a bit of fancy accounting relating to the Post Office pension fund.  George Osborne's austerity approach is stifling confidence and growth while failing even to make a dent in the fiscal situation -- it's the very definition of a failed policy.

#osborneexcuses has been trending on Twitter ever since the data were released.  Makes a change from Justin Bieber, I suppose, but not one that the Government can take any pleasure from.      

Getting it wrong while setting it right

Over the weekend there were several articles in the media making some of the points about the UK economy that I advanced in my previous post about the "jobful recession".  There seems to be widespread agreement that if the data are showing solid employment growth while the economy is supposedly shrinking, then it's most likely the GDP data that are wrong.  Nobody quite seems to know why, though there's a general feeling that the ONS publishes its estimates much too early, and by the time it gets around to revising them to incorporate more complete and accurate information, nobody's paying attention any more.  

The first estimate of UK second quarter GDP growth will be released on Wednesday -- just 25 days after the end of the period in question.  The consensus among City experts is that the data will show a third consecutive quarter of decline, by something like 0.2%.  Given that nobody trusts the data, you might hope that the figures would be largely ignored by the media, but you know that's not going to happen, don't you? There will be the usual alarmist handwringing about the prolongation of the double-dip recession, and all the good news about employment will be completely forgotten.

Last week in the Independent, Hamish McRae attempted to downplay the importance of the early GDP estimates by pointing out the scale of the revisions that subsequently take place.  He reported that thanks to recent revisions to growth data going all the way back to the 1970s (!), the UK economy had been  significantly larger than previously thought when the financial crisis hit; it did not contract as far as had been estimated as a result of the crisis; and as a result,  real GDP is now about 4% larger than previously thought.

So that's all good, then -- well done Hamish!  But not so well done to his sub-editor, who headed the article with the entirely incorrect statement that "Our economy is now around 4 per cent bigger than it was last year, yup, 4 per cent".  If you can't even read the article properly, Mr or Ms Sub, at least avoid making the author look foolish with a smug little rhetorical flourish at the end that only serves to emphasise your mistake. 


What shall we do with the financial media?  Even when they try to set things right, they still get them wrong.  What chance does poor old Joe Public have?     

A jobful recession?

Well, just what is the proper term for the polar opposite of a "jobless recovery"?  Because that's what seems to be happening in the UK.  The employment data for the three months ending in May, which were released today, are simply remarkable. The UK economy added 181,000 jobs in the period, which served to reduce the number of unemployed by 65,000.

As every media commentator has noted, these numbers seem completely at odds with the conventional belief that the UK economy is mired in a double-dip recession.  GDP is reported to have declined in both the final quarter of last year and the first quarter of the current year.  Since employment is generally regarded as a lagging indicator, it should now be declining, rather than rising steadily:  despite all the angst in the local media, the UK is currently creating more employment, adjusted for the size of the economy, than the United States.

So is it the GDP data that are wrong, or the employment data?  The accuracy of the ONS's estimates of GDP has been under fire for some time, and GDP is much harder to measure than employment or unemployment, so the best guess has to be that for whatever reason, the GDP data are understating activity in the economy.  When all the data are properly tallied and revised, a process that takes several years, the double dip recession may well be shown never to have happened.

Of course, the media have not quite been able to say anything as upbeat as that.  On the BBC news bulletins this morning, the line being taken was that against a background of gloomy survey data and falling inflation, the employment numbers could be seen as "a positive sign".  I've been racking my brains to try to think of a  background against which rising employment could be seen as a negative sign, but I haven't come up with anything.  

The politicians' turn

They're enjoying this, aren't they?

With opinion polls showing that the British public are getting angrier with the direction the country is going under the coalition government, it's no surprise that the politicians are casting around for someone to blame. And with conspicuous parts of the private sector suffering a meltdown in competence or integrity (or both), our elected representatives have plenty of targets to attack.

This morning the CEO of the security firm G4S, Nick Buckles, was subjected to ritual disembowelling by a parliamentary committee.  Buckles's firm has totally botched a huge contract to supply security guards for the Olympic Games, forcing the government to call up thousands of military and police personnel at short notice to fill the gap.

It doesn't help matters that Buckles looks like everyone's caricature of a used car salesman, and it certainly didn't help this morning when he boldly asserted that despite all the problems, G4S still intended to claim its management fee of over £50 million for the Olympics contract.  Even so, it's just a bit too convenient for the politicians to have Buckles and his company as a scapegoat.  After all, it wasn't Buckles who decided, seven months before the Games, that the number of security guards needed was not the 2,000 originally agreed, but something north of 10,000: that was the fault of the organising committee, LOCOG, which reports to the Home Office. Looking further back, it wasn't Buckles who allowed Lord Coe and his posh pals to bid for the Games in the first place, with an entirely fictitious budget of £2.4 billion, only to land the taxpayer with a tab of about £10 billion.  That was Tony Blair.  But that's all forgotten now.  

Then there's the banking scandal, which rumbles on without anyone in the media ever quite seeming to understand the issues.  The behaviour of Barclays was certainly underhanded, but it almost certainly wasn't illegal, and nobody is having much success in proving (as opposed to asserting) that anyone other than Barclays' wholesale market counterparts was injured in the process.  That hasn't inhibited the politicians.  Nor has the fact that it's the "light touch" regulatory regime that seems to be making London something of an epicentre for financial shenanigans -- a regime that has had the enthusiastic support of Labour and Tory politicians alike. (I'm not saying this to excuse the bank's behaviour.  However, it's the lax regulatory regime that causes this sort of thing to be concentrated in London, rather than in other global financial centres where the regulators actually pay attention to what's going on).

One particularly grating aspect of all this is that politicians now seem to be arrogating to themselves the right to decide who may or may not be suitable to run big public companies.  Even before the G4S and banking foofaraws, Rupert Murdoch was blithely informed by a group of pols that he wasn't a fit and proper person to be running News International.  Political pressure has removed the top management from Barclays, leaving one of the most important companies in the UK leaderless at a time of continuing financial peril.  And this morning, Nick Buckles was told in no uncertain terms that he should "consider his position" once the Games are over.

Wow.  Is there anything these politicians don't know best about?  Oh, that's right: running the country.  

Olympics: whatever can go wrong...

It's starting to look as if the construction phase of the London Olympic Games will turn out to have been the easy part, thanks to the limitless amounts of money that have been thrown at the project.  All the facilities have been ready for some time and have been put through their paces in a series of test events. It's an impressive achievement.

However....the "soft" parts of the Games -- security, transport, even ticketing -- seem to be a different story.  Take, for example, the sale of tickets,  a source of scandal ever since the organising committee, LOCOG, first revealed its plans to the public. Too many tickets reserved for Olympic bigwigs or sponsors, eye-watering prices, a botched ballot to allocate places at the most popular events, and so on.  Although LOCOG has repeatedly claimed that the Games are largely a sell-out, it has usually been able to head off criticism by magicking up more tickets out of nowhere to silence the baying mob.

Then there's transport.  It remains to be seen how well the Tube and the rest of the transport system cope when the events actually begin, but the past week has brought clear evidence that some outright dumb decisions were made right at the outset.  Cracks in a viaduct forced the authorities to close part of the M4 motorway, the main road linking Heathrow Airport with central London (and the main Games sites) for several days last week.  There were fears that the country would suffer massive embarrassment if athletes and Olympic bigwigs were stuck in traffic jams as soon as they left the airport.

The M4 has now reopened, but the incident belatedly caused a few commentators to wonder why Heathrow,  which regularly operates at 98% capacity, was chosen as the main point of entry for the Games in the first place.  One of London's other airports,  Stansted, is currently underutilised. It's closer to the Olympic village than Heathrow, and connected almost door-to-door by motorway, eliminating the need for most of the participants to pass through the centre of London.  Should have been a no-brainer.

Now there are problems with security.  With two weeks to go until the tedious opening ceremony begins (which would be a subject for a posting in its own right),  the Government has discovered that G4S, the private company awarded a £250 million (!) contract to provide much of the on-site security, is coming up way short in its recruitment efforts.  As a result, the armed forces will step in, providing a further 3,500 servicepersons to fill the gap.  Some lucky squaddies will be rotated back from Lashkar Gar to Stratford just for the duration of the Games, always assuming that the armed forces can find somewhere to house them.

Cue massive amounts of finger-pointing.  Labour blames the Tories for not picking up on the problem sooner, the Tories blame Labour for giving G4S the contract in the first place, and both parties are dumping on G4S.  No doubt the company should have owned up to its recruitment and training problems sooner, but here's the thing: the contract awarded to G4S back in 2010 required it to provide 2,000 security personnel.  It was only at the end of 2011 that LOCOG realised that it had seriously underestimated the task, and asked G4S to provide a total of 10,000!  It's small wonder that this has proved challenging at such short notice.

The guards who have been hired are likely to be top drawer.  According to G4S, many of those who showed up for interview were only there because they had been threatened with withdrawal of unemployment benefits if they didn't.  The company fears that a large percentage of those it has hired won't actually bother turning up anyway, the training period having topped up their bank accounts and renewed their eligibility for benefits.  The company can't even be certain that the security guards will be able to speak English.  Hey, no problem -- neither can a lot of the visitors, so this should make them feel right at home.        

Green washout

As the wettest British summer on record drags on and on, it's interesting to see the environmentalists contorting themselves in an effort to explain that this is what they had predicted all along.

Just a few months ago, there were fears that the UK was facing its worst drought in almost four decades, thanks to a succession of dry winters.  We told you this would happen, said the alarmists, and we're warning you now that you had better get used to it -- as the climate changes, there will be many more droughts in the years ahead.

To protect water supplies, a number of water companies in the worst-affected areas imposed restrictions on household use of water, which became effective on April 5th.  As if on cue, God threw a big switch.  The skies opened, and have basically stayed that way ever since.  Wettest April on record.  Slight respite in May.  Wettest June on record.  July, so far, on a pace to be the wettest on record.

Must be mortifying for the climate alarmists, you'd think. But not a bit of it.  This is the latest (and worst) in a depressing sequence of six wet summers.  The apparent culprit: as a result of climate change,  the jet stream has moved south, exposing the UK to Atlantic weather systems that normally pass further to the north.  Well and good, except that until this happened, the climate change models had all suggested that the jet stream would move north, not south!

A couple of years ago, there was a lengthy debate on man-made climate change in the letters pages of one of the UK papers.  One sceptic got so exasperated that he finally wrote in to suggest that the alarmists could save everyone time if they would simply list any weather events that they would NOT regard as evidence of climate change.  A very short list, it would seem.  For most scientists, "I don't know" is considered to be a perfectly respectable answer to a question. For climate alarmists,  the more honest answer seems to be "I haven't a clue, but I'm not about to admit it".

Lord Loveaduck

About 70 Tory MPs are planning to sabotage the coalition government's attempt to reform the House of Lords, mainly by filibustering it to death.


Lord (Nigel, abu Nigella) Lawson was on TV last night, pouring scorn on the reformists' idea of moving to a PR-based Upper Chamber.  (The plan would see 80% of the Lords elected using PR, with the rest of the seats reserved for a smattering of the existing incumbents). The new peers, he said, would in effect be "selected by the political parties, from lists of people who aren't good enough to get themselves elected to the Commons".  Don't hold back there, Nige -- tell us what you really think. 


Put that way, the reform proposal doesn't sound all that great -- though as a basis for selecting lawmakers for the 21st century, it does seem just a little bit preferable to heredity and patronage.     

The unspeakable in pursuit of the uneatable

That's Oscar Wilde's famous description of foxhunting, but it seems increasingly applicable to the frenzied attempts of politicians and the media to chase down and punish those deemed responsible for the LIBOR fixing "scandal".

Yesterday Barclays' ex-CEO Bob Diamond testified before a rabid gathering of politicians, and emerged unscathed and unabashed.  Today those politicians are bemoaning the fact that they "let him get away with it", an outcome that may have had something to do with the fact that none of them had the least idea of what Diamond or his bank had supposedly done wrong, or what harm it might have caused.

Last night there was an expert on the news channels talking about how the UK's "tripartite system" of financial market regulation had failed.  He seemed to think that one of the three bodies among whom financial regulation had fatefully been shared under that system was the BBA, the British Bankers Association.  This is in fact, as its name might suggest, the bankers' trade association, which might be considered to exclude it from a role in regulating the industry.*

It's hard to recall any other issue of public interest in recent years where it has been so painfully obvious that hardly anyone offering their opinion actually knows what they're talking about.  I must, however, make an honourable exception for Stephanie Flanders at the BBC.  This description of LIBOR and its inherent flaws is first-rate.   Too bad none of the politicians who grilled Bob Diamond seems to have had time to read it.

* Then again, it could hardly have done a worse job than the Bank of England, Treasury and FSA seem to have done.   

Spoiling the ship for a ha'porth of tar

The media are going ever further over the top in their coverage of the LIBOR "fixing" "scandal".  For the last couple of days, Sky News has been running a live ticker of UK bank stock prices at the bottom of the screen throughout the trading day!   Very informative it is, too.  When I was watching a while ago we were told:  "HSBC: 559.40"; then, "-7.0"; and finally, "-0.7%"!  Guess they must be using an ex-Barclays LIBOR trader to do their calculations.

Bob Diamond has now fallen on his sword -- in the process, bizarrely, unimpaling his Chairman, Marcus Agius, from his -- but before he did so, he sent a letter to all Barclays employees.   He noted, undoubtedly correctly, that the likely impact on the LIBOR setting of any finagling by Barclays would never have been much more than 0.001%, on the basis that said finagling was never by more than 1 basis point, and Barclays' submission was always averaged along with 7 others in compiling the published LIBOR figure.

That hasn't discouraged the media, who are still claiming that the impact of even that small piece of fiddling on Barclays' bottom line would amount to millions, because of the huge value of deals that are priced off the LIBOR benchmark.  Well, maybe, but the added value of a tenth of a basis point on £1 million for a full year is only £100 -- and Barclays would only make even that if it was able to move LIBOR artificially higher every single day of the year.  Given the way the LIBOR setting takes place, that would be very unlikely -- and in any case, for much of the time, Barclays was apparently entering artificially low figures, which would presumably erode its profits, not boost them.   But that's no kind of story at all, is it?        

It's hard to escape the suspicion that the media are not doing this story to death because of its importance, and still less because they understand it, but because it's finally knocked press standards off the front pages.  When was the last time you saw anything about the Leveson Inquiry?

The media aren't the only ones losing their perspective here.  The politicians are at it too, finger-pointing with shameless abandon.  (George Osborne in the Commons, looking at Ed Balls: "Hands up if you were at the Treasury when Barclays was rigging LIBOR".)  One idea getting a lot of play in political circles is that the problem with LIBOR is the very fact that it's set by the banks.  So the power to do so should be taken away from them, and presumably vested in some scrupulously neutral LIBOR God who's been in the wings all along, just waiting for this opportunity.    The Bank of England is apparently in favour of advocating the replacement of LIBOR with a new rate that reflects actual interbank transactions.  That would surely be even easier to "game" than LIBOR, and not just by fractions of a basis point either.

The most popular single post on this blog is still "Shine on you crazy Barclays", which I wrote when Diamond was appointed CEO.  I implied at the time that the firm was asking for trouble.  I can't claim this was the kind of trouble I had in mind, but there's no question that the value of the firm's franchise has suffered serious damage, out of all proportion to any damage its LIBOR shenanigans have caused.

FOOTNOTE, 4 July: This is from the BBC report on Bob Diamond's Parliamentary testimony, which is now under way: "David Cameron said it was "outrageous" that homeowners and businesses paid higher interest rates as a result of the bank's rate-rigging."  There appears to be no factual basis whatsoever for the PM's confected outrage, but that's not going to deter him.