Wednesday 30 September 2015

EU in rare outbreak of sanity

Well, the title is a little dependent on whether or not you think extending securitisation is a good thing or not as a financial product.

But on the face of it this is a relaxation of the capital rules that is quite clever. European banks have not been very effective at reducing their bad debts in the past 7 years; I am looking at you Deutsche Bank.

As a result, with the chances being that we are nearer the next recession than the last, they need to get a move of with fixing that roof whilst the sun is shining. To do this, securitising away their books will hugely reduce their capital exposure and dump it on pension funds instead...

So, in a nice turnaround, a move that actually makes the EU market more Anglo-Saxon just happens to be the right remedy for the European Banks. On the downside it is a big step towards aiding the setting up of a full banking union.

That though will be held up until reform of bankruptcy laws which may literally take forever given the various byzantine systems that exist in every EU country.

Monday 28 September 2015

Glencore: Enron Mk2?

What comes to mind when the share price of a monster commodities trader falls off the edge?  Enron, that's what.

For readers too young to remember, Enron rose from being a near-bankrupt US gas pipeline company in the mid 1980's to becoming the pre-eminent market-maker in energy and a host of other commodities in less than 15 years, at the same time as forcing through market liberalisation in gas and power across most of the western world (with every man's hand turned against them, which makes the achievement all the more remarkable), going on to revolutionise the markets for coal and paper+pulp, and developing Enron Online, the biggest B2B platform the world has known.  And there have been 14 years since it went under!

But under it went, and the reason was the oldest in the book: under-capitalisation, with profits way, way ahead of cash-flow.  (Yes, many of the more lurid Enron stories were true; and yes, they had laid waste to the Californian electricity "market"; and yes, the CFO had his fingers in the till - but none of these alters that basic, simple underying fact:  under-capitalisation.)

I know *ahem* a lot about Enron and nothing in the same detail about Glencore.  But I recognize an over-extended trading shop when I see one.  Enron's demise caused a lot of dominos to fall (in strikingly slow-motion, as I recounted here), including carnage in the banking sector; and there must be a decent chance the same will happen now.  Anglo American is being mentioned in same breath as Glencore and one strongly suspects that a few more Swiss-based firms will be under pressure.

Could a Glencore melt-down (which hasn't happened yet) be as bad as Enron's back in 2001?  Glencore per se is a lot less commercially significant than was Enron that time.  However, the global financial situation is a lot less robust now.  In 2001, the great restructuring houses were fresh from their exploits in the Asian crisis of 1997-8, and were certainly up for fixing the energy sector's woes without too many widows and orphans feeling the pinch (beyond the families directly impacted in the failing energy merchants  -  why are American employees allowed, nay encouraged, to invest their pensions in the shares of their employer?!)  Even British Energy, a very awkward casualty in the protracted aftermath, was put back on its feet without there ever being much risk insolvency would cause its reactors to pop from neglect.

Falling dominos this time around may hit the ground with a thump, and find no medics on hand to resuscitate them.


Labour 's Self Harm Diary, Day 2

Day one seemed a bit boring so it was skipped.

Labour, having elected numpties and loons of such gross error, are having a party conference to celebrate this in some distant land.

Today will be more fun. Their unreconstructed head of finance, John McDonnell, is to make his barnstorming entrance to the world at large. He is remembered for date for being nice to the IRA and once throwing the mace in the House of Commons on the floor.

Now though he will have a whole new world to speak to, the media will be attentive and I predict it will all go to his head. As a massive Communist, it will be just too much fun for him to berate capitalism and the world as a whole.

Lots and lots of juicy policies to raise taxes on the evil rich (who, in Marx's world lest we forget are, bourgeoisie middle class too, not just your evil public school posho's).

And how exciting this will be for about a day or so whilst the newspapers have something different to write about. I think it may take some time to settle into the public mind; but I can't remember and election ever won on the promise of massive tax rises for class envy reasons alone.

Finally, the moron that is 'tax expert' Richard Murphy, may get quoted and feted. This has to be the largest piece of self harm for so poor is Mr Murphy's analysis of, well, anything, that it last about as long as a newspaper on a bonfire. To see him put upon the pedestal will be of great interest.

So, times are a-changing, for a little while at least....

Sunday 27 September 2015

The Corbyn Thing Is Heating Up

This is getting interesting and very quickly, too.

You have to believe Corbyn (a) wasn't first choice for the 'hard' left;  (b) didn't really want to stand; (c) didn't expect to win.  Also, he probably doesn't imagine he can become PM. 

Or didn't.  Because some evidently hard-headed elements in his fast-forming coterie have decided there's at least enough of an outside chance, that it would be utterly crass to lengthen the odds unnecessarily.  I don't know any other way to interpret what they are doing:
Perfectly intelligent power-politics.  Items 2 & 3 above can even be rationalised for a thinking leftie:  you can honestly sign up for the headline declaration, knowing (2) that your commitment to a balanced budget is to be achieved by raising taxes and eliminating (e.g.) defence expenditure, or (3) that you can sign up for the 'staying-in' camp knowing full-well that if you come to power, the EU federasts will be only too pleased to reverse any aspect of Cameron's referendum accommodation you don't fancy.

But that's not how the headlines look (- intentionally so!) and items 1 & 4 are self-evident craven line-toeing for Daily Mail consumption.  How will this moderately ruthless, extremely hasty show of political populo-realism play with the slavering *idealistic* hordes so enamoured of unbending sea-green radicalism or whatever it is they think the New Politics is all about?  Check out "Susan's" reply here: 
@JeremyCorbyn4PM  Hope @johnmcdonnellMP isn't going to do the contortions Miliband did and make us keep reading the small print. Risky game
Yes Susan, lots of ducking and diving, you and the rest of the faithful/hopeful will need to keep your wits about you.  The Labour conference may give some more clues. 

And look at this lot.  A serious, serious power-play.  The contrast with Michael Foot couldn't be more stark: being of an age, I well remember the ecstatic leftist MPs reeling away from the conclave (of the Parliamentary Labour Party only in those days) when he beat Denis Healey for the leadership.  "We've done it, we've done it!" they giggled for the waiting cameras, much as naughty schoolchildren do when, out of childish devilment, they elect the class eejit as form captain.

Yes, someone of serious intent (Watson?) has taken charge in the happy-go-lucky Corbyn camp.  For the Tories, there is good reason for pausing awhile before deciding exactly how they should be 'framing' Corbyn.  At the very least, he seems determined not to have Michael Foot's donkey-jacket stuck on his back, if he can help it.  He might soon be fairly armour-plated, and comfortably placed for any half-arsed attempts at a palace coup in the Labour ranks from those of his party who haven't rapidly come to terms with the New Reality.  Guess which fast-recanting 'moderate Labour intellectual' Vicar-of-Bray this is*:
"There are few more obvious signs of political morbidity than the collapse, intellectual as well as organisational, of those moderate sections of the Labour party that did not back Jeremy Corbyn."
Tory high command, we are told, sees in this an opportunity to destroy the Labour Party once and for all.  Maybe: but it could be a fight to the finish with a tooled-up and grimly determined, if minority, political movement.  Rather than a push-over perpetrated on a bunch of hapless, hopeless clowns.


(* Ans: Tristram Hunt)

Friday 25 September 2015

Weekend Post: Brian Sewell, What A Card

Brian Sewell, what a great chap!  One could hardly agree with him on everything but boy, he knew what he thought, and boldy took a swing at some pretty juicy targets.

He had an appropriately robust and iconoclastic approach to the pillars of BritArt.  And I particularly enjoyed his onslaughts on C├ęzanne, that most over-rated of artists and yet, seemingly, beyond reproach these days.  Almost.

Look up some of his writings - and smile.


Wednesday 23 September 2015

Volkswagen - another example of an improving world

It is very easy, as we all age, to imagine a happier times in the past when everything was better. All of us remember our younger days as our best, irrespective of the realities; because, for the most part, being young and energetic (and single!) was in and of itself exciting and fun.

In the last few years there have been many, many corporate and other types of scandals. The journalist hacking scandal, LIBOR, Westminster Expenses, BP, RBS, Jimmy Saville, Rotheram - the news is very bad. People may say that 'things have gone to the dogs' etc.

Now we have a car manufacturer actively cheating the system to poison us all more with their products. Morally, VW should be Kaput for this alone, but no doubt as a national champion a way will be found to save it (incidentally, Germany, what is going on, Merkel has gone mad and now this too....issues are piling up).

Perhaps counter-intuitively though all these things are signs of progress. Organisations and Governments that are doing wrong, individually and collectively are getting found out, even if the wrong-doing was many years ago.

We have not yet figured out the punishments, but the crimes are being identified. This makes them less likely to be committed in the future. For example, Westminster MP's are cleaner than they used to be, as are Banks; still not perfect, but better than they were.

The modern world, with instant communication, easier whistle blowing, less deference and fear of power is changing this. Looked at the wrong way, this feels like there is more corruption than ever in the world; but it may the opposite is happening, finally sunlight is exposing all sorts of behaviour that has gone on for many decades in the darkness with no exposure.

Tuesday 22 September 2015

Osborne: Bull*** in the China Shop

Nobody, I suppose, objects to a trade delegation to Beijing.  One gathers the Chinese are buying fewer of our luxury exports these days, and are busily dumping surplus steel on us.  But maybe Osborne and his party can have a beneficial impact on the terms of trade*. 

Maybe.  It's more likely the diplomats in the entourage will be taken aside by their Chinese hosts to be instructed carefully on how Xi is to be given princely treatment when he arrives for his state visit.  No problems, we are good at that sort of thing, they'll all be gobsmacked by their Royal reception: we still know how to show a bit of palatial leg.  That might even, quite genuinely, win us some crumbs from the table, such is Chinese enthusiasm for hi-vis global prestige. 

Otherwise China is only really interested in the strategic stuff, which is where the nuclear nonsense comes in.  Aside from Osborne himself and sections of the ever crumb-craving UK engineering industry (most prominently the civils, because we probably will get the earth-moving contracts), is there anyone in the country who supports the Hinkley deal?

It's all entirely predictable.  Osborne, I suppose, is broadly in favour of remanining in the EU, but can't have too many illusions as to what that is really worth to us, nor as to the downsides that may come from that quarter.  If he sees the 2020s as his decade he'll be wanting more to occupy him than just endless fights over euro-regulation of the City, and Britain's (or indeed England's) contributions to GreekBailout5, or RefugeeInflux7.  He may also be planning to break euro-ranks at the Paris Climat thing later this year (blogpost to come on this) - another reason to keep onside with China.  Hedging the bets he makes - with our money.

So far, so realpolitik.  We were always a prgamatic trading nation, always going to turn our eyes eastwards, and our outstretched hands.  The only hope is, we are just about bouyant enough now that the terms won't be too utterly ghastly.  One day, they might be.

*But his choice of words could be better, no?  "We shouldn't be running away from China - we should be running TO China!"   Nul points for whoever made that up

Osborne apes Gordon Brown

What a time to go to China. One of the things about having a busy job in life is that you have to plan so far in advance. if you are Chancellor of the Exchequer its likely takes many months to arrange a trip to China with all the flunkies working at it to get the right meetings arranged for you.

This Osborne is reduced, the time now having arrived and at a very in-opportune moment to say this:

"I very deliberately chose to come here, to the epicentre of the volatility in financial markets this summer, to say this: whatever the headlines, regardless of the challenges, we shouldn’t be running away from China.
"And so today my message is clear: through the ups and downs, let’s stick together.
"Let’s stick together to grow our economies. Let’s stick together and make Britain China’s best partner in the West. Let’s stick together and create a golden decade for both of our countries.
"Britain and China: we’ll stick together."

So, just as Chin starts to really suffer from the downsides of the corruption and dystopian effects of the One Party State, Osborne chooses to go and suck up to them. Rather than offering support in building free markets or powerful regulators, we just sign them up to build the most unaffordable powerstation in the world (seriously, for the ludicrous cost we could likely build the as yet uninvented Fusion power station, it will be twice as expensive as using solar, even in the dark UK) for us.

Worse, China is likely experiencing the beginnings of a prolonged downturn in fortunes. It has enough foreign reserves to mask the depths of the crisis for a decade or so and is lucky that it is so tied to commodity prices that would finish the economy off if they rose.

I mention Gordon Brown because of his Jonah status of always backing the wrong horse, but also the habit of our Chancellors to be ill-prepared to deal with the real world and instead seek to shape the world as they see it.

I doubt it will be long before George Osborne becomes unstuck with his own domestic economic policies either.

Monday 21 September 2015

The People's Railway!


I am always reminded of the McNulty report when this is mentioned. This report is a decade old now and was published in the New Labour years. Above too is the graph showing overall railway subsidies for the past few years. More recently the Government has seen them declined £1.9 billion for this year.

Both are instructive. McNulty concluded that the 30% increase in the cost of rail travel and expenses was due in a large part to excessive staff wages increases caused by unionisation. Of course, this is ignored by all those on the Left.

The graph then shows that now rail subsidies are in line with the long-term average after years of above average subsidy. During the years of above average subsidy passenger rail travel in the UK increased by 50% as the Government (Labour and Tory) cut roadbuilding and spent the money on the railways.

So really, railways are a victim of their own success. The massive Leftie surge to put them in public ownership will probably not make any difference to long term costs. If rail travel is to increase, then subsidies are needed as the costs are too high for private companies to wear when they are subject to price controls. The state will find the same issues when it tries to fund expansion; HS2, Crossrail etc are very, very expensive and the contractors available to deliver it are few and far between, meaning prices will always be high.

I don't really care whether the railways are vertically or horizontally  integrated or owned by the State (today they are effectively sub-contractors of the DfT, so hardly private anyway); but going on about railway re-nationalisation as if it is going to make any difference is just silly. Nothing major will change from the current set up.

Friday 18 September 2015


"This is the New Politics.   And it's very boring"  (Bill Quango MP)
In strictly electoral terms - specifically, the 2020 general election, assuming some sort of euro-nonsense doesn't derail the Fixed-term Parliament Act - the Tories are unlikely to be defeated by Corbyn and his motley.   Certainly, the newly elevated Campaign-Groupers can apologise sweetly for past excesses and verbal diahrroea, and will soon muster a half-decent spin operation to avoid the worst of the self-inflicted damage.  Maybe even sucker Osborne into some unattractive sneering.  But Corbyn is not papabile, any more than were Foot or Kinnock or Miliband; and the massed voters of Britain will find him out.

How much will that matter?  If we are being swept up by 2015-style People's Politics (or whatever they like to call it) maybe it will matter not so much as in former times, and parliamentary formalities will become ever less relevant.  I suspect there are plenty with fantasies along those lines, in more than one of the camps of the Corbyn coalition:  those that dote on him in desperation for a happy leftie revival; or expect to use him to promote their hard-core neo-marxist policies; or are simply having a laugh (and that's a category broader than just those £3-paying Tories: there are some proper wags and chancers along for the ride in the heart of Team Corbyn, and I know whereof I speak).

These people we can leave to their dreams, be they the traumatised, the Trots or the tricksters.  There's another category I worry about, and I think back to the riots of 2011.  Readers may recall that one of our thoughtful Anons offered a comment along these lines:  the summer of 2011 was characterised by random, if contagious criminality born of sullen idleness - but the nihilistic hordes lacked an officer-class to convert the phenomenon into anything more sinister or systematic.  However (opined Anon), just such a cadre was being hatched amongst the disaffected ranks of unemployed, social-media-savvy graduates: and we could all tremble when the natural leaders and strategists and administrators took charge of the cannon-fodder. 

Hasn't happened yet.

Imagine, though, developments along those lines as the Tories continue to exercise their quietly triumphalistic political hegemony.  Under normal circumstances the leaders of all respectable parliamentary parties are pretty much obliged to swing in on the side of law'n'order: even Kinnock opposed the excesses of the Miners' Strike.  

But that's in the currency of the Old Politics.  Suppose Corbyn, by contrast, felt able to suck on his teeth, stroke his grandfatherly beard and say publicly, well, these kids do have a point, things outside the Square Mile are pretty grim for them, parliamentary politics have failed the people, austerity really is wicked, and actually quite unnecessary ...  then maybe he holds a big rally to fan the flames, organised by his well-staffed political office, manned by experienced, professional Livingstonistas who know exactly what they are doing and still dream of the poll-tax riots.

It's one thing when the whole of polite society comes down like a ton of bricks on a bunch of uncoordinated rioters as in the past.  Quite another, I suggest, when the official voice of a mainstream party provides equivocating political top-cover, with its nastier functionaries in secret liaison with Anon's officer-class (and Sinn Fein, and ...  Oh, and for good measure, with Nicola Sturgeon refusing to allow Police Scotland to send any reinforcements to the rioting cities of England.)  This in turn legitimises 'balanced reporting' by the BBC, which indemnifies civil disobedience ...

None of this wins the 2020 election for Corbyn, because the massed ranks of the pensioners of England will unwaveringly vote against him.  But it might not seem much of a victory, to the newly-installed Prime Minister Osborne. In the meantime, the streets could get very messy indeed.

So, much as I'd like to agree with BQ that the New Politics is boring - I'm not so sure.
_  _  _  _  _

On the other hand.  The house-training of the Corbynistas has already begun, as the last 48 hours have shown.  It should never be forgotten that the Labour Party of 1920 was more or less a marxist revolutionary movement, but was brought swiftly into line per Westminster traditions and practices.  Such is the genius of British politics.   

Is Corbyn equally tractable?  In which case, let boredom reign and Osborne's merriment be unconfined.  Or is St Jeremy the unreconstructed and unreconstructable messiah, as many of his supporters ardently hope? 


Thursday 17 September 2015

This is the New Politics - And its very boring

The walking gaffe machine that is the Corbyn Collective pitched up at The House of Commons for Prime Minister's Question time. The Corbynites have so far managed one serious PR error a day.
So the media and politicians were wondering just what unforced error the old hippy that leads the Labour Party would do today.
Turn up without any shoes? Have a Hammer and Sickle badge over his poppy? Yell himself into one of his trademark tantrums over the aching poverty of Tory rule.

But .. in fact .. nothing happened at all.

The Politburo of Old Labour decided on a new type of politics, The People's President would ask questions posed by the people themselves. General Secretary Jeremy had solicited questions from his legions of supporters. From the many he received, and he claimed to have had 40,000, he chose six. Six questions that would hold the government to account.

And not in the pre-revolutionary,  capitalist-imperialist style either. But in the considered, reflective style of a left wing campus. No shouting and jeering here. Simply a collection of six, unrelated questions for David Cameron to pontificate on. Questions from and Joan & John Q Public, that would shame the government into changing its ideology devoid ways.

One by one, he read out queries from Marie on housing, Steven on rents, Paul on tax credits, Claire on benefit thresholds, and Gail and Angela on mental health.

And mightily dull it was too.

 David Cameron said he welcomed Mr Corbyn's new , less theatrical style of PMQs. And we can believe him. Because he no longer has to spend days rehearsing his answers..or even the non answers he used to give to Miliband. 
He can just wait each week for Corbyn to read out, in his drizzly day delivery style, a set of phone-in topics from a radio show.

Kim in Hammersmith says the NHS is underfunded. Ahmed from Leeds says he can only get a zero hours contract... Aleysha thinks the buses should run more frequently.
 And Cameron can answer any way he wishes. Because the danger at PMQs is not the question. But the follow up question, after an answer has been given. Or in being made to shift ground when he didn't wish too. To concede a point, however trivial, is a victory for the opposition.

The old idea at PMQ's, under the party formerly known as the Opposition Labour party, was to fox the coalition. To get Cameron to give a commitment. A denial. Even a vague pledge, that Labour could file away and use against him sometime in the future. 
Or they could reel off statistics, or newspaper coverage of damaging government department figures or rifts. Point out inconsistencies in government claims. Hints of splits could be probed to test their depth. 
Or the opposition leader could quote from his own favourite think-tanks or charity or Quango.
Occasionally the opposition could set a trap. 
Miliband's Syria retreat, for example.
They can pledge their own, alternative, policy to undermine the government's. An energy freeze promise. Or ask the government to support one of their ideas, that has some public support, but the government of the day won't go near. Hacked Off style pressure grouping.

 The opposition must uncover government weakness. And exploit it. 
And one of the ways to achieve that exploitation is to barrage the Prime Minister with similar questions and to probe his responses with further follow ups that hint he is misinformed. Or out of touch. Uncaring. Or just plain lying.

Corbyn's no dynamic speaker. He couldn't ignite a crowd of firelighters with his dreary tones. His power is in his message. Tell them what they want to believe. What he sincerely believes. Tell them what they want to hear. 
He decided to give that away. He guessed that by using 'the public' to ask his questions for him, Cameron could not risk simply dismissing them.  Cameron would be answer to the People! And that did happen. A little bit. But it will happen a lot less next time. And not at all the one after that.

On this occasion, which was the first skirmish, Cameron just answered as he usually does with his fairly, easy playing tennis style.  He can hit a zinger over the net if he needs. But he is content to simply lob the easy balls back over the net until the clock runs out. And Cameron is, and always has been, very good at this style of dispatch box politics. Its where he appears a leader. Unruffled. Unworried. Unconcerned. The opposition need to get under his skin. That's when he fumbles.
Today was so effortless for Cameron his barley water would have remained untouched. 
He left it to his own MPs questions to do the attacking.

Comrade Corbyn probably wanted to try this 'new way'. Has probably believed in a more reasoned debate for decades. His advisers probably thought that it would soften the expected blows against him and agreed. Forgetting PMQs isn't a cozy debating chamber. Its an arena. 
So all that actually happened was not much. Corbyn read out some emails and Cameron replied to them much as a customer service department might.

 "Thank you for your concerns. Your call is important to us and you are being placed in a queue..In the meantime ..please hold..Did you know that we are now the fastest growing economy in Europe? For more information about how good we are... press one. hear about any other of our super range of fantastic services and achievements, press two.."

PMQ's isn't just about the enemy either. It's about rallying your own troops. Demonstrating that the opponent is on the run. Demoralising the adversary's back benchers whilst lifting your own. Making their leader look incompetent, evasive or untrustworthy. While you look impressive and statesmanlike. Its the opportunity, one of the few public ones, that the opposition leader gets to make themselves heard and to have their performance rated, applauded and evaluated by the political press. 

Having "Edna from Edmonton" ask the question isn't going to do that. The quiet on the benches isn't going to excite anyone.

 This 'New Politics.' This Crowd Sourced, Micro-politics. 

Its even more boring than it sounds.

Wednesday 16 September 2015

Anecdotes from Germany

 Image result for postcard from munich

These made me laugh in a melancholy way, all told to me first hand this week:

"It is hard for us Germans, always in every Country in Europe there is the History channel or equivalent showing Second World War documentaries or celebrating VE Day or some such, reminding everyone how horrid we are. To counter this we have to do many mad things, like putting up with wind and solar and now hosting endless refugees; all to prove we are not our grandparents. I understand why Merkel does it even though it has bad side effects for us." Postcard from Berlin.

"The first week was OK, there were lots of destitute people who had clearly walked across Europe. Hungary was putting them on trains anyway, when we turned the trains back nobody would get off at the other end anyway.  A huge effort was made to welcome them. The second week after Merkel's announcement things have gotten worse. Thousands of people are getting off trains and buses everyday. Most have suitcases and Beats headphones plugged into their iphones. The first thing they do is take a selfie at the station and then go to a restaurant for a nice Italian meal; these are not desperate refugees, they just want somewhere nice and safe to live. Few are Syrian either, although their passports say differently, they are Pakistani, Afghani and Yemeni - but who knows, all their documentation is bought en route from the smugglers anyway. So now we have closed the border again whilst we tried to sift out the actual genuine ones. Even those who have children we are discovering they are often not their own children so this is hard work."
Postcard from Munich

Tuesday 15 September 2015

0% chance of UK rate rise this year

Bank of England Interest Rate since 2009
That is not much of a prediction now, but one that would have seemed unlikely 6 months ago. It is now 7 years since interest rates were rapidly reduced to near zero.

It was an emergency measure. As a rule of thumb, interest rates have become a good guide as to how messed up our economy is. Here we are seven years late and still stuck in 'emergency measures.'

And there is little sign of this changing, with Share prices having dipped 10% in the last few months and commodity prices continuing to fall, there is no external inflation to impact the UK. China has devalued too, meaning our imports will cost less for Christmas.

There are some inflationary worries, construction has started to drop off as prices of labour have gone up 20% as a lack of supply of key skills starts to bite; but even here this is cyclical industry that is always hit when growth comes as they are the first to lay off everyone in weaker times.

Meanwhile, the deficit and national debt get harder to reduce, as does private indebtedness, as many debts are not eroded away by inflation over time. Real things, like UK House prices, become more expensive than ever as their real terms increase in price is larger than it ever use to be.

Sustaining growth in a deflationary world will be a very difficult task for the economies of the West; just as they have found in Japan.

When will inflation return? That is an even harder prediction. Wage inflation has been so limited by immigration and automation over recent years. Perhaps an unintended consequence of the Government's decision to increase minimum wages will be to push some inflation into wages over the next 2 years. Equally, commodity markets must be entering the final down phase by now - indices' are all at decade lows or worse. With commodity falls coming out of the picture and domestic demand slowly picking up then inflationary pressures will growl; but it looks like a slow rise from here if most external shock are likely to be deflationary rather than inflationary.

Perhaps rates will still be at 0.5% this time next year? Who would have thought that in 2009.

Monday 14 September 2015

People's QE by the descendants of Mao

Her Majesty's Opposition now are led by two men who seriously think you can just print money and buy stuff with it.

No worries about the effects on gilts or inflation; or indeed on the concept of fiat money at all.

This idea by the way, is in reality copied from Communist China, who have been doing the same thing for the past decade or so. They do have lots of nice new cities and stuff, but they also have lots of pollution and corruption as well as a rather tricky economy.

Plus of course, China had consumers to come and consume all the new goodies and hoped that would help repaying some of the debt raised.

In the UK we have no such thing, private debts are high and public debts are high. There is not even a credible plan to pay off the desperate QE we had to do to avert a depression.

Of course, China does not care about the Capitalist system, the Communists just want power and control. We are starting to discover the consequences of this, but in the UK, where is the support for people who would end the way of life that we more of less gifted to the World?

It's a bizarre turn of events.

Saturday 12 September 2015

The Price of Oil: Altered Perspectives

Whenever commodity prices slump I have been inclined to retort:  (a) "if in doubt, go short" - the old Enron trading motto - because there's always more stuff out there than most people realise;  and (b) well these days, just like GB as a whole I'm a big net consumer, so it suits me just fine.

Flippant stuff, eh?  But there's no backing off the wisdom of the first of those.  Extraction technology always gets better, and there is just so, so much stuff.
Hands Up!

As for the second, that basic 'consumer' situation is unlikely to change.  But does it suit me to have commodity prices so low?  Returning from W.Africa, at $50 oil I see the Nigerian situation getting more and more dire by the month.  For ever increasing numbers of Nigerians the solution will be to hit the emigration trail.  There are nearly 180m of them.  They speak English ...

It's clear enough, based on fundamentals the price of oil should never have stayed long above $100.  At those levels it was a tax on the oil consumers of the world, levied enthusiastically by OPEC, Russia et al: and likewise the metals producers etc.  The producer-nations have become pretty hooked on these 'taxes', and look at the roll-call.  How many of them can fall back for long on their reserves and SWF's?  Even the Aussies will be decamping soon  -  and they speak English, too (sort-of).  I've often described capitalism + open markets as the most effective means of allowing arbitrage to resolve inefficiencies and imbalances ...

This isn't the only large-scale wealth-transfer event on the horizon.  At the ghastly green Paris-Climat jamboree in the run-up to Christmas the third world will be demanding the West pays for 'climate change' - in hard cash, straight into their leaders' pockets.  And M. Hollande seems minded to gratify them.

So: with the demographic tectonics on the move, how do I want to pay my tax - in higher prices and direct cash transfers, or in economic migration?  If there was any choice it would be an interesting dilemma.


Friday 11 September 2015

Goldman Sachs OIl preditions fund

Here the latest Goldman Sachs pontification on future oil prices:

Oil could be at $20 next year.

In 2008, right before the price of oil collapsed, they said this:

Oil super-spike will move it past $200.

It is worse than a 10x differenc really because we should add in the big dollar depreciation of around 10% in the last 8 years.

Really, if there is one thing I know, it is that Goldman Sachs know nothing about predicitng Oil prices; though perhaps they know a little bit more baout how to generate headlines.

Still, a very evil company encouraging bad investments, so not much change there.

Thursday 10 September 2015

Whatever happened to the UK Shale dream?

One of the saner Greenies, Baroness Worthington, has today come out to say that Fracking is not the end of the world and that the Environmentalists were wrong to be so actively hateful of it. In an outbreak of near sanity she noted that Britain would need gas for decades to come and that if we did not frack it ourselves we would only be importing it from Qatar anyway.

Of course, Greenpeace et al just moan that all greenhouse gas is bad and that we should be aiming for clean renewables anyway within 10 years. To call that a fantastical position is an insult to fantasy.

Baroness Worthington does thought have a nice pay off line in that any Fracking should be done with Carbon capture and storage equipment so that no green house emissions are created; as we know, there is no actual carbon capture and storage technology available and this remains another Greenie pipedream on the same level as imagining massive tidal power stations out of the text books and into operation.

It did make me realise though that whilst the collapse of oil prices has done little to affect the US shale output the UK output remains at, er, zero. Three years ago the Government was championing the shale revolution. In between times there have been a couple of drills and lots of protests by Greens and some chicken local planning offices. In June the Government moved to make planing applications more fast track than previously; but this shows how nascent the industry still is. Truth be told it is still in the planning and theory stages only after several years of pushing.

With market prices unlikely to recover in the near future all but those like Caudrilla (who have no other assets to play with) are not hurrying to move things forward. Which is a shame, because cancelling the disastrous Hinkley Point project and pouring the saved funds into the Fracking industry would prove bounteous for the UK in terms of lowering energy cots and risks for the forseeable future.

Wednesday 9 September 2015

The Madness of Merkel: Is It Because She Is An Osti?

Angela Merkel is of course a formidable politician - read this paean to her government- kraft by the Economist, which declares that Cameron might do well to emulate her.

At the same time, she tackles some of the biggest issues in the strangest ways.  The nonsensical Energiewende has long been up there with the maddest programmes of our time.  Only the most blinkered green could imagine it makes any sense to pour truly epic quantities of German electricity-users' money into a policy that delivers, on the one hand unprecedented levels of solar- and wind-power, but on the other, a grid that is seriously weakened in terms of reliability and quality of electricity output (there could be a disaster on almost any cold winter's day in the SW of the country) and, yes, rising levels of CO2 emissions for several years.

Her willingness to harness Germany to *doing whatever it takes* to keep the Euro-show on the road knows few limits.

Now it seems she proposes to hold open house in Germany for 'refugees', the potential numbers of which are for all practical purposes infinite.

Well.  You can suspend the laws of physics for a while if you are willing to throw enough money at them: and Germany can muster quite a lot of money. Doesn't make it sensible, though; so why does she do it?

Looks to me as though the answer lies in her being a grateful Osti, deeply struck by the extraordinary economic sacrifice (or should that be investment?) made by West Germany to re-unify.  I have written about the Einheit before, to the effect that the West Germans - or at least, their politically-motivated leadership - were indeed willing to do whatever it took to achieve re-unification.  They had thought about it well in advance; had stared it squarely in the eye; and took the fateful decision quickly, but in cold blood.  And, yes, it cost them plenty.  But they are up for that kind of thing.  Bold, decisive; *principled*, *honourable* ... and with outcomes by no means assured.

Merkel knows all this intimately - how could she not ?  Once in power, she seems to have adopted it, not just as a matter of principle, but as a working principle.  But how many of these mighty throws-of-the-dice can Germany afford in any quarter-century?  

And how many of her gambles can we afford?


Tuesday 8 September 2015

While I Was Away

Blimey a lot has happened in the past three weeks while I have been in West Africa (on business).   Was this really the silly season??  Oil price.  Migrants.  Thalys train.  Corbyn.  RWC phoney war.   Usain Bolt, truly a winner and a prince among men.  Jermain Defoe, truly a w*n*er and a pri**.

However - wonder of wonders - the ebola outbreak is officially declared to be over, a true mercy although tourism has been heavily hit and several of the countries in the region are suffering economically from the fallout.

I see you have all been going at it, hammer and tongs.   Indeed, if our old friend Budgie hadn't become so p*ssed off and folded his tent, the C@W comments column might have been even more colourful.

Anyhow, while gathering my thoughts I shall haul us all back to our favouirte topic - Old Aircraft - and share with you this wonderful sight, which I never expected to see again.  Yes, it is a VC10 !  In the livery of the Gambian government: and even Wiki doesn't know about this.  You saw it here first.  Correction!  see below.

On the subject of The Gambia, let me mark your cards for an exciting geo-political development that is coming soon, to a continent near you.  The President, His Excellency Sheikh Professor Alhaji Dr Yahya Jammeh Babili Mansa, is "upbeat about the future ... The Gambia will indeed attain the superpower status in a decade, Allah willing, thus becoming the envy of the world".

You heard it hear first.

Anyhow, like I said the tourist traffic is much diminished, so when your hero ate lunch he often ate alone.

Good to be back.  I think.


Correction:  anon in the comments has queried my aircraft recognition and is right: it's an IL-62.  Red face here: I am more knackered than I thought.

Monday 7 September 2015

Better policy needed for North Sea to stave of shutdown

The North Sea, the pot of Gold for Independent Scotland, is in the worst crisis since 2008/9. With Oil prices hovering around $50, the highest cost oil producing region in world in understandably in trouble.

Jobs are being lost and contracts are either not being renewed or cancelled. Several of the international oil majors are pulling out of the region and looking to sell their remaining fields.

Moreover, the Government Regulator is fixated on De-Commissioning costs, over and above the cost of production. Laughingly a couple of years ago Executives were wondering whether to buy older fields as they balanced the income against the decom cost to see whether there was any economic point in acquiring; it came up as a no surprisingly often.

However, this is still a significant chunk of UK industry and know-how. Yes, all those Scots can offski to Dubai and the Far East for lives of expat bliss, much as shipbuilders once did.

Is there a way though to actually keep the oil following for the next 10-15 years and make the most of what we have?

The answer must be yes, but will require more Government flexibility. One hit the Industry took was Osborne raising taxes in his first budget in 2010, when prices were still high. Now that prices are below cost, there needs to be a severe relaxation of the tax regime to encourage companies to stay in business. Gordon Brown had his much maligned fuel-price escalator....but there is a kernel of an idea there.

The world now moves much faster that it used to, business is connected and the markets are connected globally to a very highly-correlated extent. Government budgets and taxes are set on an annual basis - Companies don't like too much change because they want to plan expenditures.

For oil though, the biggest variable is the price of the product, over which the companies have no control - a bugger of a business. So why not get the Government to set moving tax thresholds set on a moveable price.  The difference to today, where the percentages are set (providing some market balance), would be that different tax thresholds would come into play over quarterly or bi-annual periods. When the price of oil was very low there would be negative taxes to ensure employment and the industry continued, made up for when prices were higher by higher bands. The next impact would be that cash flows for the North Sea companies would be more stable - but better than the huge breaks given to the fortunate few like Chevron and Maersk but not to the likes of Ithaca or Enquest.

Government needs to be more flexible in its approach, else a whole industry will be gone before we know it. Oil prices are going nowhere but down for the next few months and years maybe, so without action the North Atlantic shelf will not survive the competition from the US Shale boom - or indeed a growing potential UK shale boom.

Thursday 3 September 2015

A post about foolishness


What is the matter with everyone? Is this the 'internet' or have people always been nuts?

The very first day on my very first Saturday job I had a man tell me that I should be wearing a lead vest. Because of all the dials on the luminous clocks in the jewelers I worked at.
 He was deadly serious. He came back the next week with some 'data' from the library. 
Being a novice, sixteen year old, and not knowing about the 10%, I did look at it. A story about the women who painted the luminous clock dials in the early part of the 20th century. Some of the clocks were Westclocks, which we were selling. 

 But when I pointed out to him that the 'RADIUM GIRLS' were actually ingesting the radium through licking their paintbrushes to shape and had 1000 times the natural level of radiation in their bodies, and had been working in the factories for years and years... he became upset. He was even more upset when the Boss came across and told him clocks hadn't been using radium for 20 years anyway.
Went away shouting that  he would inform the council and have us shut down.

Would he have been any happier if he'd been able to look up more data on 'The 'Interweb'?
I doubt it. He was very happy with his radiation poisoning theory. He was delighted to think that the radiation from a watch dial was equivalent to a teapot of polonium 210. 
He would only have been saddened to discover the radiation from the monitor he was using to look up that information was 1000 times greater than the watch face. Or the pavement he walked in on had given off 100 times the radiation of the alarm clock. But he would have been very happy if he found an obscure webpage of "THEY ARE POISONING US.COM". Very happy indeed. Worth a tweet, I'd wager.

People don't like their pet theories being challenged. Whatever the evidence.

A friend of mine, a woman with 2 kids, 2 jobs, 2 degrees just told me the Moon Landings are fake.
At first I thought she was making up some joke.  But no. She was deadly, deadly serious. She came out with some web sites. Some cold war face saving theory and some really paranoid stuff about "The gummint..they won't let you know THE TRUTH"

So, I say, yeah..I've looked at this too. And there are some really good articles about how its all fake. Its very entertaining stuff. And it does make you think...but all of these unexplained and impossible events have actually been explained on other websites. And its pretty conclusive even if you are not a scientist. And I pitched an easy one .. "The US flag blowing in the breeze when there is no wind on the moon.."
"..Yeah..well..that's because the flag has a wire frame..because there is no they had to have something to make it flag shaped to take the picture..And when they stuck the pole in the ground the flag is just moving from that inertia..because there is no resistance in near zero lunar gravity and atmosphere"
"So they SAY!"
"Well..not just say ..because ..the still photo does look like a moving flag, But the video shows exactly what happened and the flag does not move. Its  a pretty common video. The wire extractor part got stuck, see..So the flag didn't extend properly.."
"So...why did they "Fix" the lunar video, but forget about the still photos?"
"Ahh..haa..Not as clever as they think, are they..?"

So I gave up. 

What is depressing is this person had clearly been researching the moon landings and had taken note of the conspiracy side, but refused to believe any of the conspiracy answers. Just, point blank, refused. With a childish "THEY are behind it." And it was me who picked the lunar topic. She was actually talking about how ISIS are selling the west oil and the whole conflict is about cheap oil and that's why we aren't fighting there.
{Something similar in the comments on another thread is what reminded me of this}

Bogeyman are everywhere. They control the media. THEY control the money. THEY control how much we earn. THEY control the world.  And you can replace THEY with any group. Jews or Muslims or Obama  or Gays or Corporations or even Cats and it works just as well.
Its so infantile. Its so worrying. And this girl used to be so normal..?

But..wait a minute..maybe...Oh My God..I've figured it out...THEY got to her ¬!

Here is fairly good, easy to follow, conspiracy theory questions and scientific answers piece about the Apollo landing. But there are thousands more. Which is kind of depressing

The 10% - If you work in retail or hospitality, services or care and have to deal face to face with the general public; it is generally accepted that 10% are very,very strange indeed.