SlugFest . . .

. . . or, if you prefer, MilipedeFest

Mark W struck the first blow, but we cannot resist joining the fray


Still work-in-progress: with a face like this, the Milipede richly deserves the full Picasso-Scarfe treatment and there is yet further distortion to apply !

ND

The dangers of Marxists {continued}

To follow CU's post, here is what the Marxists have in mind.
I saw this on the comments at Dave's Part. On first reading I thought it was a joke post.
Alas, I think the poster was serious.
Thought it prudent to respond, but all your comments welcome.

HOW TO REINVENT THE LABOUR PARTY

renationalise the railways;
Can't be done. The cost would be crippling. The ongoing costs worse
stop all forms of privatisation;
Such as ? What's left..Royal Mail? Even the Army is privatised
double pensions and benefits;
Madness. Can't afford what we already have. And that isn't enough.
national training grants for all;
OK:Just scrap new deal, and take out the 'for all'
expand the educational network;
How could it be bigger?
extend public transport and fully co-ordinated;
Crossrail is allowed. + some new road bridges for London. Transport. Its a must for government
repeal all anti-trade union laws;
ermm ...no.
increase the national minimum wage;
Already it needs to stop rising.It costs jobs. Needs to be taken away from government too.
stop nuclear power, greatly expand renewables;
And turn all the lights off at 7pm.
remove all of the management "consultants" from the NHS;
we may have something here. But I think we mean different things by consultants.
control MRSA, etc by following Norway's/NLs methods, etc;
I dont know, we'll look into it.
fully resourced literacy schemes and a national-wide libraries;
I'm more for repositioning libraries inside other public buildings, but, yes ok
organise a full funded exchange international schemes for young people;
Why? children travel and exchange without this already.
implement more fair trade policies;
If you can show they don't hurt us and do favour them then,OK.
re-start the OU on the TV.
This I like. BBC 4 is unneccessary. During the day its for schools and the OU. And modernised.
seriously limit copyright laws.
We can't. And what for.. even Microsoft can't use them!
repeal the blasphemy and associated laws;
Could, but for what purpose.. its never used. Might as well repeal the one about carrying a bale of hay in a taxi.
fund international development schemes to at least 10% of GDP;
Cut International development schemes by 10% GDP
language classes from the age of 8;
Semi-Agreed.Lets say for those who show aptitude. Now I'm sure we disagree on what languages.
lower the retirement age to 60;
Raise it to 70. We're going to have to anyway, stop pretending. And that's for all workers in public and private sectors.
A National Housebuilding scheme.
Got one. Its rubbish.
A scheme to remove the stigma of vocational work amongst the slow witted middle classes;
OK. Now vocational is called "Social Assistance" happy?
reduce utilities standing charges to nomional values;
By Privatising them? Can't be done. Can threaten a lot of toothless ombudsmen if you like.
provide Phone/ADSL and other services as a basic to all homes and locations;
It already exists. Only you have to pay for it.Its called BT.
Do away with costly IT projects, implement small scale co-ordinated pilots and use open source nationally.
Part 1. we agree to limit costs on...+ I'm no programmer, but if IT projects are supposed to contain confidential data isn't open source a bit of a security risk?
free training in programming languages;
Why should this be free as oppossed to say, medicine? I don't get it.
nation-wide but locally managed computer re-cycling schemes;
Can do. In fact doesn't it exists already under the EU hazardous materials?
dramatically expand mental health and drug rehab provision;
Certainly look at it. Its shocking. But something will have to come off the NHS.
a limit on Oxbridge graduates in any profession in a accordance with census related figures.
I don't even no where to begin. But if you want less political science graduates then we agree.
compulsory purchasing of empty and under-utilised properties, for use as social housing, after quality refurbishment.
Hard to defne under-utilised.+ the law of unintended consequences is staring you in the face. When you grow up and leave your family council home, your parents must now move out. If one dies, the other goes into care?

I'm sure there's a lot more, but that's a beginning.

{Oh good}

oh, and keep a decent Left Labour govt in power for at least 20 years (these thing take time) emulating the best bits of Scandinavian Socialism.

{what is it with Marxists and Scandanavia. It used to be Russia didn't it?}

PS: make it compulsory for all Left groups to have at least 50% of the leadership made up of women, ethnic minorities, the rest to be working class and the remainder can be the usual suspects (in proportion to the society's socio-economic/ population breakdown)
although I appreciate that the latter might be a bit unrealistic!

I swear, that last line is exactly how it was posted

Anyone got any idea of how much taxes would have to rise to fund all this?

The dangers of Marxists, ad nauseam

Here today there is a rather lengthy piece on 'on the need for change.' I don't really understand it as it seems without much content to a non-westminster villager.

I have some content though, trillions of pounds spent on change in the last ten years and the country looks like these:


There is a wider discussion to be had on the Marxist need for constant change to oppress the people, but we can do that in the comments.

Insanity Alert: Government recommended to help Banks by Banker

The title is the summary of the treasury report into the housing market today.

James Crosby, ex-CEO of HBOS (presumably owner of lots of shares in the company) has done what was entirely predictable.

He has said that the failed Fannie Mae, Freddie Mac scheme (the failed US mortgage scheme that has likely just cost US taxpayers a sum not unadjacent to our entire national debt) would not suit the UK - Well done Dr. S. Holmes!

Then the report has gone on to say it is important that the UK government assist the banking industry in avoiding a property meltdown that will further affect their shareholders (i.e. Jim and his money) - only they said it was to protect first-time buyers, poor put upon dears of course.

What tosh - potential first-time buyers are in the purple at the moment, house prices falling, more choice of property, more rentals coming onto the market. Who wants to buy a house in this market mess?

Only the banks are really against a steep correction in house prices as to protect their wasting portfolios; And which bank is the most exposed to the UK mortgage market? Yup you guessed it, HBOS- yet 'the plan' is for our Government to step in and securitise the loans for them that the market will not do.

Utter stupidity - the market saying is 'trying to catch falling knives.' The idea is so bad that it is likely the Treasury team whom I fisked yesterday will run with it.

The Big Picture - Banking write-downs

Barry Ritholz has a super post - Rinse, Lather, Repeat on the latest round of cash calling in the US banking sector.

What happens over there is generally copied over here; Not such good news for our banks with big investment banking departments...

So who is in charge? Fisking the UK Treasury team

With Brown on holiday we are left in the bosom of Harriet Harman to see us through the new disasters that befall our country.

In economic terms though the worst may yet be to come. Another leg of the credit crunch would finish off HBOS or another major bank. Ramapant inflation may yet break out further and there likely to be a run on the pound as the Government loses control of the public finance.

So who is there to save us, who can be our Dark Crusader?

We already know about the all-round uselessness of Badger Darling...but what of his supporting cast? I present the treasury ministers and their cv's -

Yvette Cooper, Chief Secretary - Queen of Trophing & Mrs. Ed Balls, Harvard and LSE so a good background. Then a journalist for a short time before becoming a full time wonk. No real career experience in the private sector at a management level.

A good wonk cv and excellent academics, but no experience of business- One of these in team would be excellent...

Jane Kennedy, Financial Secretary - 8 years of Government experience, never worked in private sector, ex-councillor, care assistant and Union rep.

You couldn't make it up! Utterly unqualified to fufuill this role - imagine if she had to apply and interview for the job...

Angela Eagle, Exchequer Secretary - Oxford educated in PPE, only ever 'worked' for Unions and the Labour Party.

Ok another Blair babe wonk - still no real work experience.

Kitty Usher, Economic Secretary - Oxford Educated in PPE, only ever worked as a councillor and policy adviser.

This is repetitive now is it not? I fear for the group think there must be when they get together! Lots of time to argue the toss with civil servant too...

Liam Byrne (part-time), Revenue Protection - Harvard as a Fulbright scholar, Andersen Consulting, NM Rothschilds. Author of numerous policy papers as a member of Social Market foundation.

Wow, a man with a career in business and politics. Shame he is the most junior and only a part-timer at the treasury.

Gordon is being urged to do a re-shuffle. The lot above are in desperate of a refresh. No experience of business let alone in a downturn. No doubt all very keen the minutiae of tax law which is all very well but not what is called for right now. It says alot about our economic situation that it is in the hands of people who have never really worked int he private sector.

The UK credit culutre disaster

How can we end the culture created of always living on credit in the UK?

The numbers to the left are form the credit site, credit action. A truly excellent place to go if you do need advice or warning on debt. Mutely too has asked me to write on this subject many times

I have watched the Government squirm during the credit crunch and try to blame the banks for the situation that we are in.

And it is true, banks make far more money form you and I than they ever used to.

However, there is a cultural and regulatory reason behind this that is eating away at our long-term prosperity.

Ever since the 1970's and the first credit cards, Britain has become a nation of personal debtors. Instead of savings, we buy now and pay tomorrow. This is no bad thing when you are in control and helps to get you what you need.

There is nothing inherently wrong with borrowing money. What has changed is the culture. Instead of just mortgages, everything has a finance plan now, cars, TV's, dishwashers. Even clothes on credit store cards.

This means that the total amount of interest paid on finance by your average UK citizen has shot up. More so in recent years. Indeed with student University fees and mortgages many young people start out in life heavily in debt - it has become the default and indeed natural position foe us all.

The chickens are about to come home to roost though. With rising interest rates come higher repayments, relatively falling wages will hurt too. Instead of regulating credit further (we have some of the easiest credit laws in the world, easier than anywhere in Europe by far) the Government chose to make the bankruptcy laws less harsh. Now the daytime TV adverts are often for usury services - debt consolidation has been a growth industry for years.

All this served to do was increase the number of personal insolvencies - not change the culture of no saving and spending tomorrow's money.

Indeed rather than lead by example, the UK Labour Government is setting a terrible example, stealing from all our futures to pay for today's Government services with debt.

I have a fear that as people start maxing out their credit cards paying their mortgages (for that is what anecdotally I am hearing is happening today) we will have a major problem on our hands in the UK. Perhaps the Government plans a period of hyper-inflation to get rid of this problem?

This is one area where David Cameron's broken society theme has some strong economic ties. Moving us away from a pay later culture will help people improve their finances and be able to then make better fist of working their way out of poverty.

I will do a follow-up post on ways to make this work - but all comments welcome.

Obama is the American Tony Blair

Maybe the arrival of Obama in the UK tonight will distract attention from the media story of Brown's disaster. Notably Obama is keen to meet with Blair and tolerating a meeting with Brown.

Says it all really.

However, my own view is that Obama is the US Blair. He has little to say, this excellent post by mark Wadsworth sums up his position on many things. He is has an everyman appeal and ticks all the right boxes. After George W. Bush he can be the unity candidate for America.

But he is not the leader for tough times, he is a leader for a Clinton era. I can't see his experience and leadership helping the US through the middle of the recession and potential war.

Back home is is well in hock to protectionist unions for example; no real free trade expansion, perhaps even a repeal of Nafta.His other plans such as using Government funds to pick manufacturing winners and such like is straight out of a 1970's socialist playbook.

The only area he has a good view on is predatory lending which is a scourge in both the US and UK and is a nasty development from the past few years of ultra-cheap credit.

Like Blair, some of his words are grandiose and he has the common touch, but like Blair I don;t think he has the convictions to follow-up on to make real change. Blair talked of renewal and making Britain a young country - what did he achieve - huge debts and little real improvement in public services, mass immigration and a huge public sector.

What will Obama do in his 4 years?

Glasgow East now twinned with Eastbourne

Winner of the Eastbourne 1990 quote was Iain Dale on his blog 12.01am.

What an amazing result

An SNP win.
365 majority

This is an unmitigated disaster for Labour which will surely have serious repercussions for the Cabinet and possibly Mr Brown.

It is not possible for a political party, that has a history in Glasgow East of returning Labour MPs for over 60 years , to have such staunch support dissolve without consequences.


Mr Brown has a limpet like ability to cling on, so I would expect Mr Darling to be the fall guy.

Ed Balls should be scapegoated too, but that's unlikely.

As for the SNP this is their 'Obama' moment.
They have the big Mo and will likely decimate Labour at a national election.
Scottish Independence takes a step closer to realisation.

Tactically Labour have themselves to blame for negating the incumbents advantages.
Quite why Labour called a By Election so quickly and so poorly is a mystery [waiting to be answered in a few weeks by MPs published expenses perhaps David Marshall?]

* Call a snap by election. Why? there is the whole summer recess to bury bad news.
Labour took a long time to get going in Crewe, so don't repeat that mistake.
* Calling an election without a candidate? Why? Basic recruitment No1. Don't announce the new person until they confirm in writing.Keep it in the dark, you may need to call back the No2. Shambolic start for Labour and a gift to the other three parties.
*Announce an election over a traditional holiday week. [possibly they wanted a low turnout, but its still a bad idea]
* Announce a work for benefits in one of the most deprived areas of the country, days before voting takes place.
*bashing Margaret Thatcher in leaflets when you know that there are hundreds of pictures of your leader sitting down to tea with her.
*having a meeting with your creditors [the unions] the day after a very public, damaging, credibility destroying humiliation.

We thought that the London elections were badly handled by the PLP. Throwing away their natural advantages in Glasgow East begins to looks less like incompetence and more like panic.

Well the panic will probably get worse. 325 Labour Mps now know that they may soon be unemployed.

Only In Germany . . .

A short, partly nostalgic trip last week to the Ruhrgebiet / Niederrhein, where I spent happy days as a subaltern in the heyday of the Cold War.

The Cold War has gone, but Germany changes little. Only in Germany . . .

. . . would they take the splendid 1930’s Officers’ Mess that was my home, declare it a listed building, and turn it into a conference centre

. . . would municipal allotments be turned over mostly to growing flowers in ornate little patches like this

. . . would an electricity pylon be placed in the grounds of a Wasserschloss

. . . would a little town like Zons (pop. 5,405) have a museum with a world-class collection of Art Nouveau glassware

. . . would the same little town host 8 marching bands and a dozen uniformed civilian ‘hunting’ societies (ahem), parading with swords, axes, rifles and cannon !

. . . and would a riverside dyke be called a Hochwassershutzanlage . . .

Happy days.

ND

Photos © Nick Drew 2008; and, not for the first time, German spelling corrections courtesy of M.Wadsworth

Where is Cameron's Glasgow East ?

Glasgow East is the 25th safest Labour seat with a 13507 {43.66%} according to Constituencies in order of % Majority after the 2005 General Election.
The current polls are still predicting a Labour win but there is talk of a majority of hundreds, not thousands according to The Telegraph

There are 41 similar safe seats before the first Conservative seat appears on the board. That is Kensington and Chelsea with 12148 majority.
Now, to put this in a Conservative perspective, it is as if the Tories were desperately trying to hang on to their safest seat. The average voter in Chelsea is as likely to vote Labour as they are to eat spam fritters. I expect the average voter in Glasgow East is as likely to vote Conservative as it is to holiday in Aspen.

The 24th safest Tory seat is Runnymede and Weybridge. I choose the 24th as it is where I used to live and the figures are near enough. Runnymede and Weybridge majority 12349 {28.37%}.
This is ABC 1 territory. The highest social status and many of the highest earners in the country.
Smack in the middle of the stockbroker commuter belt. Average price of a modest 3 bedroom home £300,000. Good schools, transport links to 4 international airports, 30 minute train to Waterloo, multi-multi multi - million pound homes, championship golf couses and low crime. The prosperous blue heartland.

Imagine holding somewhere like that with a majority of 13500 and coming away with 800.
And then being pleased because it was a win.
No. It would be a catastrophe that would undeniably cost the leader their job.

Labour may well do much better than that. In the current economic and political climate some allowances need to be made.

7000+ very credible
5000+ good
3000+ weak but spin able
1000+ disturbing in the extreme
1+ the hollowest of victories

The fact that talk of a win as somehow good and a step towards regaining the initiative shows even more clearly than Crewe exactly how far Labour's stock has fallen. It should be nothing less than a very comfortable win.

Whatever the result I confidently predict the phrase Eastbourne in 1990 to be a recurring theme.

Bank -rupt?

Heroic shorting of HBOS by its own underwrites seems to have saved the face of its terrible rights issue. Only 8.3% of shareholders wanted to take up the rights.

My reactions to this:

- How come the Board is not asked to make any sacrifices for this wreckage?

- The banks will kill each other (RBS was shorted so much for proxy purposes its shares fell by 25%) for money - so not much change there.

-With the £4 billion to cover potential losses, HBOS should escape a Northern Wreck scenario. Just don't plan on buying in now and getting any capital growth of dividend payouts until the recession is over in a couple of years.

- The rights issue model for banks is now closed. Any other companies in big trouble from now on have very limited options to get hold of new money. No wonder Mervyn King is trying to get the BOE to be able to borrow secretly.

Signs of Stagflation ?

Shop prices in the furniture and flooring sector increased 2.3 per cent month on month in June.
Not a big rise to be sure, with CPI at 4% but this is the Furniture sector. The retail sector facing the biggest slowdown due to the slowdown in the housing market.Mortgage approvals slumped from 58,000 in April to 42,000 in May, a 64 per cent decrease year-on-year. House sales are down 40 per cent year on year.

The problem is furniture, flooring and DIY should be bucking the inflation trend as they slash prices to stimulate sales. They can't because of rising costs, from wage inflation in the Far East, the rising cost of raw materials and freight costs, which are closely linked to the steeply rising price of oil.

Overall retail prices are staying down quite well, but as we reported before many retailers are selling last years summer stock. The summer sales have some genuine bargains in them.
But once the autumn stock arrives in around 4 weeks time, then retail price inflation overall may begin to rise.

If a retail slowdown occurs then the home economy begins to sink.
I'm with CU on interest rates. Food, Oil and Power costs are creating inflation.
Consumers have to pay those bills, they can't be avoided. That takes disposable income out of the economy. Cutting rates will put some of the money being taken out back into peoples pockets.

Balance the books.

It took almost all day, but I thought long and not too hard and came up with a way to balance government spending with government borrowing.
Not only that, but it actually engages people in the democratic process. not only that, it makes money!

Ok, here's the deal.
Every Saturday night Ant and Dec front a mixture of Britain's got talent, Big Brother, Dragon's Den and X factor.
A panel of judges from political parties, business, trade union, media + a few regular people from the real world get to vote on.. sectors of spending.

There's a big lit up board that shows tax receipts / spending /money returned to taxpayers in a bar chart form. Departments present a short film of why they deserve funding. A film of cancer care centers, a shot of an ambulance, a child in an incubator, a woman with a new hip.
[tears in the audience].
Then the counter argument Poly Clinics/ MRSA/ a one size fits all pay deal regardless of income/ Cleanliness/ projected health costs/ trans gender operations/cosmetic surgery/ administrators as a % of the NHS staff budget.. and so on.
The judges debate and Simon Cowell and Paxman and the Dragons pull bits apart and then the studio audience and you the viewer at home, get to vote the spending through.Or not.

"Tonight Aircraft Carriers at £4 billion. But that's without planes isn't it?
Erm yes.
And without sailors?
Erm yes.
And without small support ships and larger docks?
erm..
so give us your real ready to roll price Ministry of defence?
Erm £25 Billion.
Ohh they didn't like that did they Ant? No Dec, they didn't. Well let's ask the audience..They want the money spent on helicopters and housing for soldiers and increased combat pay..

Well you get the idea. Council leaders on £100,000, Health and Safety,new town halls, MP's expenses, Quangos, Green Taxes, speed cameras, diversity courses, the Eu, the Potato board, union modernisation, the arts council, the BBC, Airline fuel exemption etc... all must pass the Room 101 test.
If theyfail and go in, then that's it. No more state spending.

And when the public tires of the format.. do it on ice!

It's the Labour/Tory economic face off...

A strange week in the world of UK economic policy. Alistair Darling has decided that there should be no more tax rises; So brave Badger after all these years of increasing the burden....

On the other hand his Master, Gordon Brown, has decreed that the Treasury look to relax fiscal rules to allow more borrowing. As much as this is final proof of the way they have mismanaged the economy, it is also the right thing to do. As I posted last week it could be the economy crashes utterly. the last thing to throw into that mix is huge public spending cuts and more unemployment etc. But no more than is necessary to current commitments only.

So what has been the Oppositions response? Two ideas have been floated this week. One is to make the Government accountable to an independent body for its spending. This is a great idea if you are about to lose power and would have been fantastic in 1997. However, in 2008 is this really the answer?

In some ways it irros discussions about the NHS - at the end of the day we vote for politicians to enact spending policy, make laws and start/end wars. To pretend that somehow an independent body should be in charge is an affront to democracy and also says how little politicians trust even themselves.

Secondly David Cameron said on Marr this morning that he would be open to tax rises should the need arise in 2010 when he is elected. Again, this is poor posturing, it is one thing not to lower spending in a downturn, quite another to advocate increasing the tax rate. There is plenty of scope for reducing waste and no room for raising taxes at all.

The Conservatives are at last putting forward some economic policies, but they are still very lacking on detail and clear thought. This kind of approach won't win them an election and instead Labour will begin to close the gap unless firmer, more intelligent suggestions are made.

Here are some easy ones:

List 100 quango's to scrap and put the savings into local government
Say that all the wasted IT projects, ID cards etc, will be ended.
Define the green taxes and the trade off to income tax/personal allowance.
Merge NI and Income tax and increase personal allowances.

HBOS car-crash; denoument

Who would have thought that Andy Hornsby's HBOS would miss it rights issue? By 10am This morning it was still at 269p when the issue was at 275p.

Later today a banking rally has saved the underwriters - convenient, huh?- from having to hold huge amounts of stock underwater. Still, as they dump the stock on sub-underwriters and the market it may yet drop the price below water. So much for the fees too!

Still, the wreckage is just beginning to be found and the job losses have started now.

However, could this be the bottom of the UK bank market - quite possible this time. Although bear market rallies have been known before......

An Equitable solution?

Very busy today, noticed though that the Government are going to get sued again for money due to their regulatory incompetence.

How long until the Northern Rock shareholders join them?

Looks to me like public finances are going to get even more out of control.....

The Ballad of Fannie Mae

Wake up Fannie, I think I got something to say to you ...

So it’s all come unstuck for Fannie and Freddie, and we may all suffer.

All you did was wreck my bed
And in the morning kick me in the head

These guys were riding for a fall: the US mortgage industry, as we all know now, was lending like a drunken sailor on pay-day, partly for the origination bonuses and partly because there was pressure to let previously excluded sectors of American society - excluded because they couldn’t afford it - in on the property boom But they still couldn’t afford it. To take a slight liberty with the lyrics (as I am wont to do, ahem, though usually elsewhere)

You lent me for a way-big home
Just to say you were willing to loan

With unforeseen consequences ? Nope, this is Black Swan author Nassim Nicholas Taleb in 2006:

"Fanny (sic) Mae, when I look at their risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup … The increased concentration among banks seems to have had the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard – I shiver at the thought."

You made a first-class fool out of me
But I’m as blind as a fool can be . . .

Fannie, I wish I’d never seen your face

ND

Jacqui Smith tough new proposals

In a new initiative today Jacqui Smith the Home Secretary announced that banks who have repossessed peoples homes will be forced to visit the now homeless families as they wait in line at a shelter.

"This will surely stop the reckless lending by High [on cocaine], Street Bankers. Some have been indiscriminately targeting low income families with offers of cheap credit for years. Having to face their defaulters will show them the error of their ways, and hopefully frighten them into more reasonable lending practices.Seeing the victims of a credit crunch may make the perpetrators realise there is nothing glamorous about negative equity."

But the Chief of Police said "Nothing has been done about these gangs of financiers for years.They are often young men in their twenties,hanging around the big cities, especially London, pumped up on cheap credit and big bonuses.They would often borrow in the USA and then ship it over here. There were no real penalties at all given by magistrates or the FSA for giving unlimited credit to poor risks. Their supervisors didn't know where they were or what they were up to, and often, as long as they were out of sight, they didn't care. How we, as a society, in the 21st century could allow this sort of reckless behaviour is astounding."

A member of a Council said "This whole policy is half baked. I blame the biggest banks for allowing a flood of cheap money onto these new gated estates. The government's twenty-four hour borrowing law has only exacerbated the problem. Sometimes older institutions would lend money to the younger, minor ones. And many firms allowed self certification to get round the 18 is under age law and bypassing the need for proper ID. How this new initiative will stop mortgage crime is not clear.Round here there's a townhouse going up for sale every day. People are scared. Many of the youngsters are carrying Connect cards. They know the financial consequences of using them, but on a night out, sometimes it just all gets out of hand. It can all kick off at a taxi rank when they need funds to get home. They see a gang hanging around a cash point and it can just escalate."

And at a brokerage den our reporter asked if this would have any effect on their behavior.
Some said that they had already scaled back their lending but once the heat was off they would return to it.
"Oh, I say, None at all old chap" said one dealer. "If I can get some stuff in from the middle east I will be blowing it around town in a second. I'm not interested in homeless people.We have our own problems you know.Like takeovers""

Opposition parties have condemned the proposals as unworkable, and not tackling the real problem. Vince Cable claimed that the real problem was being too soft on these bankers.
"An institution in the north, made itself the leading lender. It attracted many borrowers and soon became known as the infamous Northern Rock street gang. When they were finally bought to book, the government dithered over their sentence and then in the end decided to just take them into care. No prison sentences were handed out to the ringleaders. Not even community service, and they were permitted to retain all the loot they had amassed."

But in a recent communique the government has tried to clarify its position. Building Societies and Independent Financial Advisors will now only be taken to visit the solicitors or removal men of the people who's homes have been taken away.

We returned to the 'Alliance' gang in Leicester to get a comment but found only empty premises. They had gone.

Santander to the rescue?

The proposed purchase of A&L today took me by surprise (I wish it had not, share price up 50% ina day!). Santander, already the owner of Abbey, will have a huge 40% share of the UK mortgage market - just as the property bubble deflates.


At the same time, as I have noted before many times, the Spanish economy is in meltdown and has no good news coming out of it. Domestic construction in particular, which Santander is heavily exposed to in its loan book, is in a massive slump. Where Santander scores high marks is in not being exposed to the main credit crunch in terms of owning any mortgage-backed securities.

A&L therefore must be seriously undervalued for this deal to make sense, or else the Spanish are nuts. Santander has a very efficient back office system that allows it to beat most other banks to profitability hands down, hence its success. No doubt it sees A&L as a perfect addition to its successful Abbey purchase.

But it is going to take more than that to make this work; Another Spanish-UK mega-takeover comes to mind - Ferrocial buying BAA - a disastrous acquisition all round.

However, could there be another angle? As A&L will have a very odd looking book Santander can write this down to near zero value and book the acquisition as goodwill. Which generates a tax break under Spanish law (up until the EU intervenes). Very shrewd perhaps....

The Existential Inflation issue

Thinking about yesterday's post and the reaction, it strikes me that there is a fault line in economics thought at the moment. Monetarist declare inflation is all money supply, Keynsian's and others that it is pure supply and demand.

Yet today we face global inflation for oil, food and commodities and a contraction in money supply; it is a complete contradiction for policy makers to deal with. Let alone politicians, none of whom I have heard even mention this issue at any length.

I have come down on the side of the monetarists, over supply of money was one of the main causes and under-supply of money is going to cause the recession; but this still does not deal with the issues of commodities and oil, both of which have true demand changes in their profiles.

It would be good to hear some real thought about what is the answer to the problem we face. The Bank of England is clearly stuck for ideas - it chooses the middle ground and leaves interest rates unchanged ( not the middle ground in some ways, as rates are far too high).

An offical Brown out: UK Economy over the Cliff

Posting this does not make me a happy man. Some whom I read (and like) seem to relish the idea of our economic woe and meltdown; not me.

The UK economy is on for a tough time. In context, in the Great Depression of the 1930's unemployment reached 25% and GDP shrank by 33%. I don't think we are going to go there.

However the definition of a recession is 2 consecutive quarters of falling GDP and it seems we could easily double that. There are some really poor imbalances and terrible decisions being made, with external events too the shocks just keep coming.

1 - House prices are not just falling but diving, in January the consensus was for house prices to fall maybe 5-10%. Well that is where we are now, half-way through the year and headed off a cliff - see this Telegraph chart:



2 - Oil and commodity booms, fuelled by real increases in demand, a flight of money from equities, biofuels and political troubles across producing nations are causing inflation - and there is nothing we can do.

3 - Money supply is actually contracting very quickly and real interest rates for consumers and corporates are rising - just at a time of deep indebtedness and need.

4- Interest rates are set to control inflation - however they control what will happen in two years time. We won't have inflation in 2 years, just and economic desert. Now is the time to start dropping rates, at least 0.5% in the UK, perhaps more. But this week the Bank ignored the calls.

5- The Public sector is so huge that nothing can be done to save money or create more jobs, instead the huge burden leaves us with high taxes that lower real take home incomes. Even the frivolous EU despairs of us. Neither main party has any solutions for this currently or is seriously considering slashing the state ( not should they now, more unemployed does not help at this time) but it needs to have its expansion halted.

6 - However raising taxes is suicidal, but that is what we are forced to do due to government spending. Pure financial insanity.

7- The stock market is at a 10 year low and falling, pensions investments are being hurt and there is no end in sight. People keep calling the bottom of the banking crisis, but Bradford and Bingley and Lehman Brothers are heading for a crash, as are Fannie Mae and Freddie Mac in the US mortgage market. This seems nowhere near an end.

8- UK policy is run by the incompetent Alistair Darling, Europe has no response to the ripping apart of the euro area - I stick to my prediction that Spain will fall out of the euro at some point soon. Only the US has some credible economic leadership, but is hamstrung by a lame duck President

9 - Global growth is stagflating as all the developing countries suffer from inflation, meanining our export markets are not going to be easy to grow either.

10- Personal indebtedness is so large that it will take years to pay-off and if that does happen alone this will cause a recession. It actually exceeds GDP. A huge chunk of jobs in the UK are tied to this for mortgages and loans in in Financial Services, Property and Retail for spending. All of which are screwed for the next few years.

(11 - Let's not even go there that Israel and Iran kick-off a major war too)

So overall, we have had it. The Tories need to think radically about the poilcies to get us out of this mess as we may still be in technical recession when they get into power in 2010. 2008 is bad, 2009 will be worse and the light may return in 2010, but maybe poor until the Olympics.

We are in it for the long-haul. Good luck to all the readers of this, I hope you are somewhat prepared and have jobs that are secure enough.

Not just trading figures...these are M and S trading figures

"Marks & Spencer recently highlighted the challenging high street conditions when it reported a shock 5.3% fall in UK like-for-like sales in the 13 weeks to June 28 - its worst quarter since April to June 2005."

Not that much of a shock. Similar very poor weather to last year, lack of easy credit, falling house prices and the gloomy economic news have hammered consumer confidence. The 'luxury' sector is always hit first. It can be good news for the discount retailers as customers flee the higher priced chains and look for something a little cheaper and someone should be reaping the benefit.

"Freddie George, a retail analyst at Seymour Pierce stockbrokers, said Primark saw flat like-for-like sales in the past 16 weeks."

The Primark figures ones are the ones to watch. Primark figures are good enough for now when just meeting last years figures is a struggle, but not for keeping the economy growing. Retailers can't absorb level figures for long. Staff costs rise with the minimum wage and the increased holiday allowances recently bought in. Rents reviews are upwards only and can be huge. Most suppliers are having to increase their prices due to transport costs, wage inflation and materials costs. Retailers cannot just pass these costs onto consumers due to falling sales, competition and the need to actually reduce prices to entice people in.

If Primark figures begin to wobble then the recession would really be beginning to bite.

We shall be watching closely.

"Taxpayer could end up paying nuclear clean-up bill"

MPs Not Completely Asleep Shock !

"A damning report from the House of Commons committee of public accounts criticises ministers for providing no certainty over the future cost of decommissioning Britain's existing nuclear sites - estimated at £73bn [and] that the clean-up costs of a planned new generation of atomic power stations do not end up in the lap of the taxpayer. (Grauniad)

"We cannot be confident ... that even this figure will not be significantly upped when the estimates are next revised," said Edward Leigh, chairman of the CPA."

It’s worse than that, matey: as regularly predicted here, we’ll end up paying France’s bill, too.
ND

Guess Who ?

Following a post on Letters From A Tory
Can anyone identify this political leader from these snippets

Answers in the comments..

He was the product of "the unifying and overriding influence of one single paramount force -- insecurity." As a boy he grew up "starved for affection," for his father was "a silent, undemonstrative man."

His early speeches were seen as going "over the same historical ground so often" that his audience's "eyes glazed over in stupefaction."

He served with great distinction in a political career that took him to a major cabinet position.

He possessed a cold personality and reacted badly to any form of criticism. He seemed contented with the services of mediocre men as long as they agreed with him.

From his basic insecurity derived personality traits that shaped his premiership. He had difficulty making up his mind; he was "a man almost wandering through life allowing others to make his decisions for him." But when he did make a decision, he rigidly adhered to it. "Something in his character stopped him short of admitting error. 'I was right,' he said, and would say again and again."

He had the insecure man's habit of immersing himself in petty details. As when he was a minister he actually counted "the lines of work done by his secretaries in a morning's work -- and even as Leader he spent hours on the most minute and bureaucratic details of bills and nominations to office and promotions of very junior personnel.

Fractious and argumentative, he lacked the communication skills that this high office required. Finding it so very difficult to trust subordinates, the few he did trust were elevated to positions in which they were unsuitable. He would support them again and again.

He would rather win an argument than win the contest.

A good strategist, he had a cold, often petty, personality. He tended to always side with his friends, no matter how worthless they were. When, on the very rare occasion he replaced bad ministers, he also tended to replace them with ones who were even worse.

Having decided someone was loyal he became "perhaps the most loyal friend any man could have," and that loyalty helped bring about defeat. Long before [date] it had become "incontestable" that "he was unsuited by personality and character to be a chief executive.”

"His obsession with pointless paperwork," his "obstinacy," his "woefully inadequate" performance as Premier, and of "the utter myopic isolation in which his intellect worked" reflects badly on his time as Leader.

He was a stubborn man, who was narrow-minded, and seldom willing to compromise on issues, never seeing the greater goals that could be achieved. But, his devotion to the cause was without question, and in support of his beliefs, he was willing to work tirelessly, often without sleep,toward preserving these ideals. Even his wife said upon his election "He did not know the arts of the politician and would not practice them if understood." It turned out that she was right.

In selecting his cabinet members, the selection process was based mostly on political debts owed, rather than the best man for the position. He seldom interfered in his executive departments and usually listened to his counsel of ministers. He did however, interfere with the xxxx Department, so much so that his appointments became known as merely his pawns.

Tory Fuel Tax Plan

The new announcement by the Tories of a fuel tax plan is at least travel in the right direction. The Tories can see the madness of extra taxes at a time of crisis and of adding to the inflation level by making fuel even more expensive that it has to be.

However, there are 2 awkward holes in the pitch as I see it:

1 - In order for this to work, it means that the Tories will have to 'pick' a 'right' price for oil. As the price of oil has increased 9x over in 10 years, this is quite a feat - beyond the best market participants. How the government is meant to know this is quite hard.
If they get this wrong this policy will seal high prices for everyone - a 40% drop in oil price will not feed through to the paying public.

2- It is playing a game with the public finances, so Labour and the Lib Dems are right to point this out. To make this a safe play, £3 billion odd of savings should be outlined - thus making this a complete win win. With current government spending far out of control, finding £3 billion should be a doddle. Perhaps start by looking here.

Iain Dale thinks it is a great idea; well, at least it is populist and not haranguing us to eat less food by the Prime Minister...

Goldman's get the money, again

In terms of Chutzpah, Goldman Sachs often win the field. They are also uncannily good at predicting events - perhaps having their alumni run the western economies is a help to them.

However, the latest tale for them is a hilarious one. Firstly they faied to get the rights issue away for bradford and Bingley, then they 'saved' the bank with private equity group TPG stepping in.

Only this was to fall over too at the last minute. Instead the FSA pushed the current shareholders to rescue the bank before it became another Northern Rock - i.e. on the governments books.

So Goldman screwed up right? Umm..no, the contract they have means they get a nice fee however B&B gets it money in. So despite being of no help to the process at all they still get a fat cheque. Some firms just can't lose it seems.....

Super Carrier

So the contract for the two new aircraft carriers is signed. Much to the relief of the workforces in the shipbuilding industry.
Leaving aside the fact that these contracts are very lucrative and secure work for UK companies for a good while and ensure shipbuilding remains a part of the countries industry, are they in fact, value for money.



The carriers will cost 4 billion pounds
At least £4 billion as defence procurements have a history of overspend.

The USA Nimitz class carriers cost around $4.5 billion each. They are nuclear powered and carry 85 aircraft that use steam catapults to launch them.
The UK ones will not be nuclear powered, and will carry UP TO 40 aircraft.
Not being nuclear is apparently a cost issue. But it means that there can be no steam powered catapults as these require massive amounts of power. Instead there is the Ski-jump takeoff.
That severely restricts the type of aircraft that they can carry. One report is that the carriers can only use the F-35B Lockheed Martin built in the USA. This is a kind of new generation Harrier part of the joint strike fighter program. But there is a superior F-35C model already under design that won't be able to be used unless modifications to the aircraft carriers are made, despite it having superior capabilities.

The Nimitz class CV's are now some 30 years old and are still a match for most counties entire air forces. These new generation UK carriers as I understand it would have difficulty going head to head against the USS Nimitz or its sisters and coming out ahead.

I just hope that once again the armed forces do not end up with an expensive piece of kit that is always going to be, at best, just about good enough due to some 'cost saving' decisions in the planning.
We have already had helicopters that don't fly, small arms that required a certain amount of 'assistance' to fire, the Eurofighter that is great for air-to-air, but probably only a little better than what it replaces in air-to- ground.. and so on.

This is a very expensive project it is important to get it right.

Only in America

Americans sometimes contrive to screw things up royally, but you gotta admire the attitude.

Last week I spotted this - well, you can hardly miss it - above the Julia Richman High, once one of New York's roughest schools, see backstory here.

Our very own Francis Bacon. Somehow, though, it's difficult to imagine it over one of our own inner-city academies ...

ND

photo © Nick Drew 2008

Sweet story

quick one for today, very busy at work which I guess is a good thing overall.

This story in the FT caught my eye. tate and Lyle, the sugar business, has sold it sugar trading business. Already its hit product, splenda, is not a sugar product. So perhaps Tate and Lyle will eventually end up as another business altogether - just food additives perhaps?

Ian Ferguson the CEO, ex-Unilever, probably has ideas like that.

However the good bit is here:

"Selling the business would continue Tate’s efforts to reduce its exposure to volatile, commodity related earnings, the group said. Meanwhile, Tate said it would strengthen its raw cane sugar sourcing team, which buys the raw material for its EU-based refineries."

Sugar cane is one of the most variable priced products on the world market - any ETF in this area for example suffers huge swings, mainly downwards due to huge over-supply in the last year. How this reduces overall volatility is beyond me...

The bear is a comin'

As said before the City "Sells in May and goes away." last year proved this to be not entirely true, as the credit crunch kicked off in the middle of July and proceeded to ruin the summer in Mustique as all the tennis pairings were ruined (and some other minor effects too, allegedly).

however one year on the the financial scene is a mess. high inflation, a real oil shock, poor producivity, a rapidly collapsing mortgage market, massive government debt spending have all combined to hit the world and induce recessionary concessions and a real fall in living standards.

Despite all of the the FTSE held up quite well all things considered:




Even as late as May this year the rallies had held the losses to about 300 points in total. A losing year but not too bad. However, the bad news comes now. The FTSE fell 150 points today and is approaching two and a half year lows. the bear is settling in, this amateur graph clealry shows the dead cat bouncing.

Even now analysts are predicting the year to end up at about 6300; that seems a long way from here with the difficult months of September and October still to come. Not the time to be buying shares for the faint-hearted - my portfolio is sold out of the FTSE more or less now and into funds and commodities for the moment. This poor run has though reduced me to just 3% growth June to June, down from 20% gains at Christmas time.

Clearly I should work for a hedge fund.....