Why can't newspapers, even the upmarket ones, employ people who can interpret economic statistics properly? Today's Telegraph has a headline "Retail sales hit 25-year low" -- but of course, they didn't. The headline represents a misinterpretation of one of the far-too-numerous survey-based reports that the media love to play up. There are lots of these in the housing markets too, and they are almost never reported sensibly.
So what does this latest shock horror report, compiled by the CBI, actually say? Here are the key paragraphs from the Telegraph report:
"The trade body's survey of 153 retailers showed that 60pc of respondents said sales in the first half of August were lower than a year ago. Only 13pc sold more goods than a year earlier.
The balance of -46 percentage points is the lowest since the survey began in July 1983 and compares with -36 in July."
All that means is that retailers are gloomier, at least by this measure, than they've been for 25 years. But the actual value of retail spending is many times higher now than it was 25 years ago. What's more, the latest official data actually showed a small increase in retail sales in July, something which seems to have escaped the reporter on this story. So it's simply wrong to say that retail sales are at a 25-year low.
The sad thing is that the CBI will not make any effort to correct this misinterpretation of its survey -- in fact, it positively revels in its ability to generate misleading, doom-filled headlines. It's all ammunition for its increasingly strident calls for an interest rate cut. Too bad the newspapers keep falling for it.
Thursday, 28 August 2008
Tuesday, 26 August 2008
The 2012 Olympics? Priceless
The "handover" parties across the UK on Sunday, as London replaced Beijing as the Olympic city, were sponsored by Visa. Given that the London Olympics were an impulse purchase made at an unknown (unknowable?) price, set to be paid for over a very long span of years, that seems very apt.
Friday, 15 August 2008
Greenspan: he's still getting it wrong
Former Fed Chairman Alan Greenspan (formerly known as the Maestro, but probably not any longer) has been sounding off to the Wall Street Journal about the housing crash and related issues. He says the US Government's bailout plan for Fannie and Freddie is "bad": the shareholders should have been wiped out and the companies reconstituted and refloated. He might be right in principle, though the consequences of such a course of action in the febrile state of capital markets might have been difficult to control.
Greenspan also takes the opportunity to dodge any blame for the credit crunch. According to the WSJ, "Mr. Greenspan has been criticized for contributing to today's woes by keeping interest rates too low too long and by regulating too lightly. He has been aggressively defending his record -- in interviews, in op-ed pieces and in a new chapter in his recent book, included in the paperback version to be published next month. Mr. Greenspan attributes the rise in house prices to a historically unusual period in which world markets pushed interest rates down and even sophisticated investors misjudged the risks they were taking".
Only the investors misjudged the risks, eh, Alan? The Fed's behaviour in cutting interest rates every time the equity markets came under threat -- the dotcom collapse, 9/11 -- might just possibly have encouraged that behaviour. They called it the "Greenspan put", and it's probably not something the Maestro wants to see featuring prominently in his obituaries.
As for the idea that "markets pushed interest rates down", those of us who think that interest rates are the price of money might interpret their historically low levels in the first half of this decade as evidence of an excessive amount of money washing around in world markets. That's something Greenspan and pals could have done something about, but they were so busy taking credit for low US inflation (which really originated in China and India) that they took their eye off the ball. You'll have to do a lot better than this if you want to rehabilitate your reputation, Maestro.
Greenspan also takes the opportunity to dodge any blame for the credit crunch. According to the WSJ, "Mr. Greenspan has been criticized for contributing to today's woes by keeping interest rates too low too long and by regulating too lightly. He has been aggressively defending his record -- in interviews, in op-ed pieces and in a new chapter in his recent book, included in the paperback version to be published next month. Mr. Greenspan attributes the rise in house prices to a historically unusual period in which world markets pushed interest rates down and even sophisticated investors misjudged the risks they were taking".
Only the investors misjudged the risks, eh, Alan? The Fed's behaviour in cutting interest rates every time the equity markets came under threat -- the dotcom collapse, 9/11 -- might just possibly have encouraged that behaviour. They called it the "Greenspan put", and it's probably not something the Maestro wants to see featuring prominently in his obituaries.
As for the idea that "markets pushed interest rates down", those of us who think that interest rates are the price of money might interpret their historically low levels in the first half of this decade as evidence of an excessive amount of money washing around in world markets. That's something Greenspan and pals could have done something about, but they were so busy taking credit for low US inflation (which really originated in China and India) that they took their eye off the ball. You'll have to do a lot better than this if you want to rehabilitate your reputation, Maestro.
Thursday, 14 August 2008
Don't do as I do, do as I say
This quote from US Secretary of State Condoleezza Rice is pretty staggering: “This is not 1968 and the invasion of Czechoslovakia, where Russia can threaten its neighbours, occupy a capital, overthrow a government and get away with it. Things have changed.” George Bush has weighed in on similar lines, saying that Russia's recent behaviour in Georgia is not acceptable "in the 21st century".
I wonder why the Russians didn't realise that the rules had changed. Maybe they saw the US invading Iraq and getting away with it. Or perhaps they saw the US invading Afghanistan and getting away with it. Or perhaps they saw the US bombing Serbia and separating off one of that country's provinces, Kosovo, and getting away with it. Or maybe they have longer memories and recall the US invading Grenada to overthrow an elected government and getting away with it.
None of this is meant to excuse the Russians for their heavy-handed approach in Georgia, but really, taking lessons in international behaviour from the Americans makes about as much sense as taking dancing lessons from Stephen Hawking.
I wonder why the Russians didn't realise that the rules had changed. Maybe they saw the US invading Iraq and getting away with it. Or perhaps they saw the US invading Afghanistan and getting away with it. Or perhaps they saw the US bombing Serbia and separating off one of that country's provinces, Kosovo, and getting away with it. Or maybe they have longer memories and recall the US invading Grenada to overthrow an elected government and getting away with it.
None of this is meant to excuse the Russians for their heavy-handed approach in Georgia, but really, taking lessons in international behaviour from the Americans makes about as much sense as taking dancing lessons from Stephen Hawking.
Friday, 8 August 2008
Truth and justice, the American way
This week President George Bush spoke out strongly about China's record on human rights and religious freedoms, just before flying to Beijing to attend the Olympic Games. According to Dubya, the American people are very concerned about China's shortcomings in these areas.
Also this week, Osama bin Laden's former driver, Salim Hamdan, was sentenced to 66 months in jail after a "fair" trial at Gulag Guantanamo. The sentence dismayed the prosecution (i.e. the Bush government), which had been pressing for a 30-year stretch, especially as "time served" means that Hamdan will be eligible for release only six months from now. No need to worry, though: the Pentagon has already made it clear that Hamdan will continue to be detained as an "illegal enemy combatant".
President Hu Jintao is probably too polite to express the Chinese people's concerns over the Bush government's human rights record -- more's the pity.
Also this week, Osama bin Laden's former driver, Salim Hamdan, was sentenced to 66 months in jail after a "fair" trial at Gulag Guantanamo. The sentence dismayed the prosecution (i.e. the Bush government), which had been pressing for a 30-year stretch, especially as "time served" means that Hamdan will be eligible for release only six months from now. No need to worry, though: the Pentagon has already made it clear that Hamdan will continue to be detained as an "illegal enemy combatant".
President Hu Jintao is probably too polite to express the Chinese people's concerns over the Bush government's human rights record -- more's the pity.
Thursday, 7 August 2008
Wrapit: Farepak for rich people
I'd never heard of Wrapit until the company came unpacked this week. Running wedding gift lists sounds like the kind of business that can only exist in a society where people like to think they're too busy to do anything for themselves. Cooking? Housework?? Looking after the kids??? Malgorzata can do that! Set up my own wedding list???? Next thing you'll be suggesting I rely on the taste and generosity of my friends and family.
Even in the parallel universe where something like Wrapit can exist (I believe that universe is known as "West London"), a business like this has to be run on sound financial principles. Most importantly, the money intended by customers to be used for buying gifts has to be kept separate from the company's own operating funds. This requires the business to be properly capitalised, which Wrapit almost certainly was not, and it requires it to grow only as fast as its available capital will allow. Wrapit seems to have grown rapidly and not very sensibly: why did a web-based wedding list company need six retail outlets? Once this sort of company starts using clients' money to pay its operating expenses, it becomes not much more than a Ponzi scheme, and its eventual fate is sealed.
Wrapit's management is trying to convince the media and its customers that the company's demise is all down to the credit crunch and to HSBC in particular. Given the nature of the business, if Wrapit had been properly run and well-capitalised it would have been all but recession proof. Like Farepak before it (and on a much larger scale, Northern Rock), Wrapit is a casualty of the "get rich or die tryin'" ethos of the past decade. It's unlikely to be the last.
Even in the parallel universe where something like Wrapit can exist (I believe that universe is known as "West London"), a business like this has to be run on sound financial principles. Most importantly, the money intended by customers to be used for buying gifts has to be kept separate from the company's own operating funds. This requires the business to be properly capitalised, which Wrapit almost certainly was not, and it requires it to grow only as fast as its available capital will allow. Wrapit seems to have grown rapidly and not very sensibly: why did a web-based wedding list company need six retail outlets? Once this sort of company starts using clients' money to pay its operating expenses, it becomes not much more than a Ponzi scheme, and its eventual fate is sealed.
Wrapit's management is trying to convince the media and its customers that the company's demise is all down to the credit crunch and to HSBC in particular. Given the nature of the business, if Wrapit had been properly run and well-capitalised it would have been all but recession proof. Like Farepak before it (and on a much larger scale, Northern Rock), Wrapit is a casualty of the "get rich or die tryin'" ethos of the past decade. It's unlikely to be the last.
A kriminull ideer
A criminology professor is suggesting that "variant" (i.e. wrong) spellings of common words should be accepted as correct. Professor Ken Smith of Bucks New University (no, neither had I, but it's in High Wycombe) is apparently fed up with correcting elementary spelling errors in his students' essays -- truely, ignor, things like that. He wants to be allowed to ignor, sorry, ignore them.
I've never taught in a university, but I have interviewed hundreds of newly-graduated job seekers. It's frustrating to know that a lot of them may have very limited writing or math skills even after a university education. You have to go to a lot of effort to try to identify the competent ones before you take the giant leap of hiring them. Now Prof Smith is proposing to throw his hands up entirely and leave prospective employers even more in the dark about the basic skills of the people they may be hiring. Not that he's doing anyone any favours -- Bucks New University may be cool with bad spelling, but employers won't be. Guess what, kid: you got five devalued A grades at A-level and now you've got a degree that nobody trusts.
I'm pretty sure that Bucks New U wasn't there in those paleolithic days when I was applying for university. All of these new "universities" have been funded by the government in order to make the benefits of higher education available to a much higher proportion of the UK's youth. If a lot of the teachers think like Ken Smith, it's probably a waste of public money.
I've never taught in a university, but I have interviewed hundreds of newly-graduated job seekers. It's frustrating to know that a lot of them may have very limited writing or math skills even after a university education. You have to go to a lot of effort to try to identify the competent ones before you take the giant leap of hiring them. Now Prof Smith is proposing to throw his hands up entirely and leave prospective employers even more in the dark about the basic skills of the people they may be hiring. Not that he's doing anyone any favours -- Bucks New University may be cool with bad spelling, but employers won't be. Guess what, kid: you got five devalued A grades at A-level and now you've got a degree that nobody trusts.
I'm pretty sure that Bucks New U wasn't there in those paleolithic days when I was applying for university. All of these new "universities" have been funded by the government in order to make the benefits of higher education available to a much higher proportion of the UK's youth. If a lot of the teachers think like Ken Smith, it's probably a waste of public money.
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