Sunday 20 May 2007

Sunday Papers Roundup

Barclays seeks regulators' nod for ABN Amro bid: the takeover saga may be entering its closing stages.

As usual, though, the papers miss the real story. To clinch this deal, Barclays is offering to move its HQ to Holland, but my regulatory spies tell me that the Dutch will refuse to act as ‘banker of last resort’ for the whole group. So – will the Bank of England ? Over to you, McBroon.

Police hunt arms trail in Downing Street: they are looking for e-mails sent by and to Jonathan Powell, Tony Blair’s chief of staff, suspecting that BAe adviser Lord Powell, his brother, was lobbying Downing Street aides to have the investigation stopped.

As we asked last week, did Blair really think he’d killed this one?

Darling faces up to a nuclear tomorrow: although he was anti-nuclear 20 years ago, little Alistair “is now in favour of it as part of the mix”.

He’s also in favour of keeping in with nuc-backer McBroon. So it’s a very fortunate coincidence that he’s changed his mind. British Energy, which is starting to recruit for the anticipated bonanza, will be delighted.

Ministers will block Gazprom move on UK: "Whitehall officials have indicated that ministers have reserve powers that could block a takeover."

Another sign that McBroon is making the running: Blair had indicated Gazprom was welcome to buy whatever they fancied. Wee Gordo was always more skeptical ...

And just to emphasize the point: Russians ready to seize back BP's Siberian gas reserves.

Well, last year they shafted Shell, Exxon, Chevron, ConocoPhillips, Total, Marathon, Statoil and Norsk Hydro – so why not BP? John Browne was naïve in more ways than one.


Electro-Kevin said...

What do you think of this ?,,2082749,oo.html

Nick Drew said...

Thanks for dropping in, Kev, it's been a while.

... deep breath ...

1) I have a reasonable regard for Elliott and am sure that many (most?) of his points have a lot of truth in them: but (see below) he is wrong about some important things, and personally I don't know how the balance falls. I only wish I did.

2) Obviously I agree that McBroon is a prodigious peddlar of phoney stats and general bullshit: heaven help us all.

Some counter-points:

3) There is nothing wrong with a person or a nation making a living as a 'counter of the money' (& the City does a damn' sight more than just that - ask the Slicker when he gets back from his hols). My accountant does that & he (a) makes a good living & (b) provides a genuine service which I am happy to pay for. Same is true for several other service industries that Elliott seems to despise and/or consider not to be real, just because he can't stub his toe against them. That's just stupid.

3) Fact, more cars are produced in the UK today than before the demise of our home-grown auto industry. I realise that some are assemby-jobs, and most are for foreign owners: so what ? It''s hardly 'no manufacturing', is it?

4) I get around European industry quite a lot and I have news for Elliott. Manufacturers the length and breadth are planning to close down factories in the old 'EU 15' countries and replace them with new, ultra-energy-efficient plant in Eastern Europe & Turkey, where labour costs are very low. As fast as their little legs can carry them (which may in fact take a while). Check on German / French / Italian manufacturing in a few years' time).

Finally, Kev, I do have a puzzle which I've pitched to Slicker before (& he said 'good question, I must get around to it ...'), which is the 'Enron Accounting' problem. I'm going to post on this later in the week, while I am still holding Slicker's car-keys. Then he can put me right when he comes back.

I had seen you challenging folks with Elliott's article elsewhere, so, if you found the above interesting perhaps you can link it back to chez toi or wherever else.

Anonymous said...

If Barclays buy MBNA with they merge my credit cards?? Just wondered - as then I would be over my limit...

Nick Drew said...

Over the limit, Mutley?

I find that hard to believe!

James Higham said...


I presume you know the nature of the Exxon-Mobil and Japanese hardball tactics on Sakhalin 2?

On what was, after all, a Russian asset to begin with?

Electro-Kevin said...

Thank you Nick.

I can't remember using the article elsewhere (except a personal email)but it expounded my misgivings about our economy so I may have done and forgotten about it - I first saw it two days ago. I will include your explanation in my thinking from now on.

What do you think will happen with the former manual classes in our country, welfare etc ? Is there such thing as 'country' anymore or are the Corporations the new Nations ?

Regarding the car industry - a friend of mine at work is a former automotive design engineer having worked on contracts for Honda. He tells me a lot of the manufacturing jobs in the UK auto sector are low skilled, relatively low paid and for tax dodging purposes. For his level of skill there is no viable work for him, he is now a train driver like me as are three MScs I have trained and one former BBC World Service broadcaster.

As with Europe, America has been outsourcing skilled work so that Fender guitars and Ford engines are manufactured in Brazil.

I notice a skills shortage in the production sector, why doesn't our education system satisfy this ? And what is the prognosis - will the wealth be distributed in our country or will it be clustered around financial centres ? I'm beginning to understand why the Government appears to be keen on a socialist type redistribution of wealth whilst being careful not to impinge upon the profits of big business - milk the middle classes as the least path of resistance.

Nick Drew said...

James: fair point, but the Russians would echo your last sentence in respect of all these episodes, would they not?

My point was principally directed at the naivety of Browne, who somehow (and against advice, I happen to know) imagined BP would be immune from this wholly predictable / predicted backlash.

The really amazing thing is, however often they get slapped, they still keep going back or more ...

Nick Drew said...

Kev -

Small point first: not sure how two of your observations stack up (no viable work for a certain level of skills // skills shortage for production sector)

Major point: your last sentence is very telling. Like you, I suspect that (to the extent it was ever thought through in advance) the current McBroon strategy is: generate + attract as much £££ as poss via financial-sector / 'London-sector' laissez-faire (including tax-haven policy etc), and skim off enough to maintain the non-productive (former manual worker) masses as welfare-clients.

The latter have the votes, and (I suppose that McBroon supposes) will vote for continuation of this ghastly settlement. The major beneficiaries of the laissez-faire (= the top 1% or so) are certainly onside with the strategy. As you say, it's the 'middle-middle classes' who are under the cosh in all this.

To cap it all (well, to cap such low-end wages as are still paid), unrestrained immigration is also permitted. We are asked to believe this is a major economic benefit, though why 'they' think any of their own voters will agree is beyond me.

I am sure this whole edifice is unstable, but exactly how and when it breaks down, I'm not clear. (House-price collapse might be the seed, because debt is a major part of how the middle classes manage to soldier on.)

There may be another flaw in the McBroonite logic. He assumes that his client-voters won't bite the hand that feeds. I'm guessing that one day they will - Scotland may be the dry-run - for a couple of apparently contradictory reasons:

(a) some of them are not sophisticated enough to understand the tacit 'bargain' (which can't easily speak its name in an election campaign, although interestingly you do find some loose-cannon leftists willing to voice it)

(b) others will think that no plausible govt would dare to discontinue their benefits. (Of couse they might be wrong - see what Clinton did in the US)

Electro-Kevin said...

Thanks for your answer, Nick - as usual very enlightening.

Perhaps I ought to elaborate on the viable manufacturing jobs:

My friend worked his way up in the manufacture of Perkins diesel engines. He first took an apprenticeship and from there an HND in design. He is able to design and construct engine parts at every stage and is able do this by himself given the tools and the workspace - a pretty useful chap to have around you would think. I can vouch that he is very intelligent, articulate and bi-lingual (as is his graduate wife)- he has excellent taste in French wine and malt whisky (I am still suffering from his last visit). By moving into the service sector he halved his hours and increased his salary by 25%. People don't want to work in manufacturing because it doesn't appear to be valued here - my friend couldn't buy a house until he'd left his chosen field. Such a shame and a loss of good talent.

Nick Drew said...

Well, when Armageddon comes & we all need to take to the hills, I certainly want your mate on the team (and his wife)(and their reserves of French wine)(and the Hitch with his gold & his shotgun)

But don't you suspect, Kev, that this story means there is a surfeit of diesel engineers in the global economy? Which is just one of those things (they used to say "a TV repair man will never be out of work").

Isn't his ability to get an even more remunerative service-sector job actually a happy ending?? I was delighted that the story ended that way, at least at the material level.

Sorry to be so cold-hearted about the romance of diesel (my father-in-law waxes lyrical about the steamboats he used to run, so I know about oily rags on pistons). But UK plc can't makes its living as an industrial theme-park (sorry, I'm at it again, no disrespect intended).

None of this callous disregard for engineering affects my agreement (see earlier posts) with your concerns over the 'Broonite settlement'.

Electro-Kevin said...

A lot of it has to do with location. A train driver cannot have his work outsourced to Taiwan. Another issue we have here is one of personal expectations in our country - the true consequences of globalism still haven't hit us yet as we still expect to own our own houses, to be able to eat in restaurants, enjoy foreign holidays ... these simply aren't the pleasures of our equivalents (often betters) in the developing nations.

I have always accepted this: manufacturing follows cheap labour and the belief that employment and a high standard of living is a birthright is a delusion. I feel that while our money looks big the accrumulation of personal debt indicates that many people haven't cottoned on to the fact that we are facing concealed inflation and that they are living beyond their means.

I reluctantly hope for a collapse in the housing boom in order to make people 'get real' and face up to the changes they are going to have to make sooner rather than later. My concern is not so much loss of wealth as the loss of the rule of law. A good quality of life can be had in poor countries - so long as the rule of law exists. In the afterglow of Empire and this most recent and spectacular housing boom people are not paying proper attention to the errosion of law and liberty.

Nick Drew said...

Yep, law and liberty. I remember talking to some Iranian exiles in the 1980's: they said they weren't so bothered to see democracy introduced, it was the rule of law they dreamed of.

Incidentally, a property crash will be a bigger redistributor of wealth than even McBroon...

Anonymous said...

Here's one for you too:

I am interested to know how the Russian oil situation will develop. Please let us never be in the situation where we rely on them because we did not progress fast enough with new power stations and alternative renewable energy. I'm beginning to think it could happen.

Nick Drew said...

Amazing story, Ellee. I went with trepidation to see whether my post had wiped $4 bn off BP this morning ...

and ...

actually, it gapped UP! So no harm done(but Lord Browne is still naive).

On the Russians, first of all it is worth remembering that they have been exceptionally reliable suppliers of gas to Western Europe for decades - despite Uncle Sam forcefully predicting they'd leave us freezing as a tool of foreign policy. (If you were a German gas importer, you'd nominate the Dutch as the most unreliable gas exporter over the years.)

On the other hand it is fair to say the rules seem to have changed last year, when Italy got caught in the cross-fire between Russia and the Ukraine for a short while. And of course Eastern European countries have suffered several times.

Fact is, we gotta get on with it. Renewables and even nucs can't meet even half of our electricity demand (I'd guess one third, max). So - imported coal and, increasingly, imported gas. Most of the gas will be from Norway for many years to come (we used to import 30% of our gas from them in the 1980s, before our decade of self-sufficiency). The rest? Russia, Qatar, Algeria, Egypt, Nigeria, Trinny, Libya, Oman, UAE ... take your pick.

There should, at least, be a fair amount of diversification of sources. Oh - and high prices, too.

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