Thursday 31 December 2015

New Year Predictions Game

I never do very well at this, least year worse than ever. Perhaps I should stop. But since when have facts and logic ever prevented me from holding forth on this blog, eh?

so before the true merriment of the end of 2015 which I for one am glad to see the back of, one last game.

Five Questions, Five answers:

1. Will there be a referendum on the Britain leaving the EU in 2016?
2. Will Hilary Clinton be elected President of the USA?
3. Will EU sanctions on Russia be Lifted?
4. Will the oil price end up over $40 by the end of the year?
5. Will Jeremy Corbyn still be leader of the Labour Party?

Nice simple questions. Over the weekend I will collate and record the answers. Winner gets a bottle of Champers this time next year!

Happy New Year from

CU, ND, BQ and BE

Thursday 24 December 2015

Merry Christmas from the Capitalists!

Yes, a Happy Christmas to all our readers and excellent commenters, perhaps we shall meet a few more of you over a pint next year.

And a festive truce for all our foes - yea, even unto generation wuss & the greens  - and goodwill to all men (and women)* ... (and the People's Front) ... (and the Popular Front) ...

And prosperity for all in the New Year!


*yeah OK, and [grits teeth] transpersons [/gt]

Tuesday 22 December 2015

All This In One Year!

At this point in the calender some poor hack on every newspaper is set on to write a review-of-the-year, but this year it writes itself.  Can all of this really have happened in 12 months?
  • Greece
  • migration tsunami
  • Conservative election victory ...
  • ... and wipe-outs for Miliband, Clegg, Cable, ScottyLab, Balls, UKIP...
  • Paris, terror, ISIS, wars & rumours of wars, more Paris terror
  • VW neck-deep in dooh-dooh
  • England wins RWC, oh, wait a minute, daydreaming there ...
  • oil to $36
  • rise of Corbyn
  • Osborne hands keys of our future to Xi
  • Sepp Blatter, IAAF etc
  • Ukraine down-and-out, Russia back onside
  • EDF starts building Hinkley Point, oh, wait a minute ...
  • interest rates on the rise
  • Merkel finally loses it
  • Osborne declares war on green crap
  • BE joins C@W
  • COP-21 a nullity
  • Corbyn becomes first Englishman in space
  • Cameron triumphs in Europe, oh, ...
Almost enough distractions to allow Osborne off the hook on tax credits.  Heavy, heavy stuff.  And still a few days left for Chilcot to deliver and the Third Runway to be announced!

(... what were tax credits again?)


Monday 21 December 2015

Coal: Notes Towards a Gloomy Thesis

No more UK deep-mine underground coal production, then.  Momentous, in its own way.  Yonks ago I advocated moving to the new coal-burning technologies ("ultra supercritical" sounds suitably 21st C) but they don't seem to be gaining any traction in Europe or the USA, so maybe China? - but I'd be surprised to see them around these parts anytime soon.  No, it looks like gas for us which ain't so bad actually; the timing is good and there are things we can do as an accomplished trading nation to mitigate the geopolitical risks of import dependency.

But let me sketch out a gloomier thesis ...

Lovelock's great dictum, Civilisation is energy-intensive, should be written above every door in Westminster and Whitehall.  Remember how we got here.  In the 18thC, British engineers were moving ahead with the developments that would underpin the industrial revolution.  To fuel this, notably, there was a massive switch from biofuels / charcoal to coal, which marks a gigantic advance in efficiency - without it, the IR would have been dead in its tracks as almost every suitable forest in England had been cut down for burning.

In the relevant jargon, coal has excellent energy density (if not as good or flexible as oil) and an absolutely superb ERoEI (we ran a thread on this a couple of years back).  The ERoEI perspective is important, and if you don't know it, you should take the time.  (You'll find that it's not without controversy ...)  Tracking back downhill from using coal and there will be progressively less energy, and hence less wealth, to be spending on civilisation or the defence thereof, until someone figures out something really clever with boron or thorium or whatever.

So - civilisation: what sustains it?  Let's allow that ancient Greece was recognisably a civilisation; and Rome; and several others besides in the ancient world (we needn't be eurocentric about this).  Slave labour ... pillage ... and of course total military superiority over a relevant part of the globe.  No-one ever thrived freely to reach their civilisation-potential when an immediate neighbour had a clear and sustained advantage in weaponry.

Which brings us to the gloom.  What happens when one civilisation deprives itself of an economic 'weapon' of the first magnitude, while others (in this case China and India) have every intention of retaining it ?  We may shortly find out.

This isn't one-dimensional.  Gas really is pretty cheap just now, and plenty of the costs are sunk. China will slowly kill its population if it continues emitting outright pollution (as opposed to CO2) on the current scale: this alone will cause them to clean up their act  (& yes, that can satisfactorily be read both ways).  The west may, paradoxically, somehow, gain a mighty strategic benefit from forcing itself 'needlessly' into a more costly energy paradigm - though it's most unlikely to be the one the greens imagine ("it creates lots of jobs!" - yeah, and destroys plenty, too); far more likely to be a variant of the 'phoenix phenomenon' that I wrote about here.  It's hard to see chaotic India as a threat to the west: any gains they make in ERoEI will be frittered away rather than parlayed into Chinese-style slow-burning expansionist aggression.

And I well know that at this point many will chorus "go nuke!"  Well, maybe - but can we afford the decade-long development schedules, not to mention the grotesque costs?  If there's one 'authority' who enjoys the respect - often grudging - of most, it's Prof David Mackay, and he (if I've understood correctly) reckons nuke is the way to go.

Thanks to Scargill, King Coal has fewer friends in the UK than he might.  Guardian readers mourn his passing in the same way Telegraph readers lament the disbanding of a great infantry regiment or the scrapping of an aircraft carrier: but even most of the reds (well, the reds that read) have learned some green instincts.   By the end of March another substantial tranche of our coal-fired power plants will have closed forever.  The remainder will run for a few years on open-cast & imported coal.  Gas it is, for better or worse.  There's no going back.


Friday 18 December 2015

Blog Festivities

'Tis the season to be, errr, jolly - and Santa Rally or no, the Capitalists like a drink as much as anyone.  If loyal readers would care to join us for beer + banter, we're to be found at this fine establishment near London Bridge (south) on Monday evening, from about 6:30.  Food's OK too.

(That'll be us in the pic, in our shirtsleeves out on the pavement ... or inside if wet, as they say)

In memoriam

In the style of one of those Hollywood Award ceremonies where they pay tribute to those that have passed away this year....

The high profile 2015 politicians,who have faded away. 

Thursday 17 December 2015

Oil Price, Yes - and What About Gas?

Further to Timbo's prodding, it's time to wheel out the old oil-price graphic - recalibrated for the remarkable current turn of events.  Last time something like this happened it was $10 in 1998 - which turned out to be the bottom (where canny John Browne bought Amoco, Arco and BurmahCastrol).  At the time, the Economist surmised it might fall as far as $6 ...

We've had several cracks at this since it crashed through 60 a year ago - click on our 'oil price' thread if you fancy - and the geopolitics are still playing out.  Saudi Arabia is behaving as though it reckons it can hold its breath; and of course little Volodya is disinclined to blink.  US producers, debt-financing and all, will simply play the market game; and their stamina has long since confounded the ignorant.

Anyhow, today my subject is the parallel collapse in the price of natural gas.  The current situation is that the world is divided into 3 gas markets: North America (cheapest); Europe (mid-range); and Far East (highest).  Until the shale gas revolution really got into its stride, imported 'Atlantic' LNG was the marginal source for both USA and Europe, and so prices in these markets converged, with those of the Far East at much higher levels - even higher still after Fukushima, when Japan increased its gas burn significantly.  However (cutting the long story short) North America is now self-sufficient but essentially unable to export, and so becomes a low-priced 'gas-island'; but LNG is now available in vast - and growing - quantities and demand is falling across Japan and Europe, so the Eu and Far East markets have converged (mediated again by LNG).  The USA is now on the point of being able to export its shale surplus, and soon the whole world will be one gigantic, heavily over-supplied gas market.

With me so far?

For reasons good, bad and historical, the price of gas can often be highly correlated to that of oil, and the weakness in oil is exacerbating the weakness in gas. None of these phenomena seem likely to go away imminently.  So: the price of gas in the USA is set to rise a bit, and that in Europe + Far East to fall even lower.  This has been brilliant for Japan & Korea.  The Chinese don't use very much, but Russia of course would dearly like them to, and has at long last sold them some future supplies on terms so humiliating, they don't really like to talk about it.   In the meantime some extraordinary power-politics has seen Gazprom trying to muscle back into the good books of their main hard-currency customer, playing their mighty German card for all it is worth, which is quite a lot.  In any event they are doomed to another mammoth round of price renegotiations, as continental European buyers trigger their crazy Civil Code 'price re-opener' clauses and demand cuts or rebates by the billion.

The other big gas exporters, notably Qatar, also Nigeria and increasingly Australia - all LNG rather than pipeline - are a bit stuck, and will probably just have to suffer from disappointing sales prices on their sunk-cost production.  The problem for LNG sellers is that the production cost is high, whereas Russian (and Norwegian etc) pipeline gas has a much lower marginal cost, sometimes even negative if oil production comes with the gas.

So:  some world-scale economic impacts, geo-politics, power politics - but what about us in Blighty?  All this price-softening has come at a very good time for us because (a) our own North Sea gas production is in terminal decline and (b) one of our important sources of winter gas - the Dutch - are rapidly winding down production from the gigantic Groningen field (which kicked off the whole North Sea thing in the 1960's) in light of its increasing age, and propensity for causing serious earth tremors

On the other hand it does nothing for stimulating a shale-gas industry here: but hey, that gas ain't going nowhere, it'll still be there when we need it.  Genius George seems willing to burn some political capital to get the fracking underway, but I'm not really sure why.

It will directly impact two other industries (and indirectly, many more).  Firstly, it will hasten the long drawn-out demise of European coal use, which has been enjoying an indian summer here and elsewhere.  We are gradually seeing gas become cheaper for power generation once again after several years of being out-of-the-money; and of course government policy is to stimulate - somehow, they are not quite sure how - a new and very substantial 'dash-for-gas'.  They "want" 30 or so new gas-fired power stations to spring into being, and sustained low gas prices are the way to get 'em.

Secondly, it trashes the prospects for renewables and nukes, because it will cause the price of electricity to fall, and make fixed-price subsidies ever more expensive.  The whole low-carbon thing was predicated on ever-rising prices.  The greens know this (despite loud denials) and we must draw a kindly veil over their ever-increasing misery

Everything has its cycle, and who knows how long this one will last?  Long enough to cause tremors even greater than those Groningen earthquakes, I suggest.  Many will wonder why domestic gas bills don't fall in proportion to the wholesale price: but that's not the only way consumers can benefit from these mega-trends.


Wednesday 16 December 2015

There may not be a European Referendum

Lots of press coverage over the last few days about UK attitudes to the EU referendum. All of these show that one way or another, things are currently too close to call.

Now in reality we would expect that status quo options would jump up when people were really faced with ticking a box to leave the EU, but nonetheless people are worried.

At a recent City dinner, all the conversation was that Cameron has lost control of the negotiations, will get nothing and then by accident there will be a Brexit.

Which would suit me just fine and give us plenty to talk about for years to come.

However, Cameron has a great last shot which people are forgetting. He has already said he will resign as leader before 2020. If he can't get anywhere with Europe and fears he will lose a referendum, then an option open to him is to resign. Tony Blair, his mentor, did this after all, ducking out and avoiding the EU question altogether.

With Cameron gone, the new Tory leader would have room to either move the date or dissemble totally the referendum idea. Many people in the Country would be hugely relieved, as would the EU who would throw in some weak concessions to show how happy everyone really was.

UKIP may surge, but with a weak Labour party the Tories may still be in a very strong place to win in 2020 and avoid the EU Referendum.

No doubt Mr. Osborne has already informed the Prime Minister of this way out of the very big hole now dug.

Tuesday 15 December 2015

Paris Climate 'Agreement' - Really Funny

Our longtime commenter Timbo614 chided me over not posting a new 'falling oil-price' piece, it having fallen clean through 40.  And indeed I must - but just now there is something really entertaining to be shared.

Yes friends, the Paris Climate summit came to the predictable conclusion on Sunday, with much triumphant tub-thumping from the podium and much heartfelt weeping from the floor (at least I think it was a pool of tears on the floor).  Immediate green reactions were close to ecstatic - you see, we knew we could do it ... and now, three days on, they've noticed that *ahem* the Paris Agreement contains two-tenths of bugger-all.

As I trawled page after online page of wailing and gnashing of teeth ... well, you'd need a heart of stone etc etc.  But fellahs, it was always going to be an empty Agreement!  If it wasn't empty, it wouldn't have been agreed.  As predicted, George Osborne won't need to trouble himself with any commitments we can't comfortably achieve.  Or indeed any at all, it seems.

Anyhow, as part of the usual service to readers I have read the turgid Paris Agreement from end to end, and thought you might like to share these gems:
Parties should, when taking action to address climate change, respect, promote and consider their respective obligations on human rights, the right to health, the rights of indigenous peoples, local communities, migrants, children, persons with disabilities and people in vulnerable situations and the right to development, as well as gender equality, empowerment of women and intergenerational equity
(What about transgender, eh ?  Presumably the African delegations had a red line on that one.) 
Parties acknowledge that adaptation action should follow a country-driven, gender-responsive, participatory and fully transparent approach, taking into consideration vulnerable groups, communities and ecosystems, and should be based on and guided by the best available science and, as appropriate, traditional knowledge, knowledge of indigenous peoples and local knowledge systems, with a view to integrating adaptation into relevant socioeconomic and environmental policies and actions, where appropriate
I really like the sound of "best available science and traditional knowledge ..."   Including Aristotelian physics, perhaps, and a bit of voodoo?  Well why not indeed?  As appropriate!


Where are thou Santa Rally?

Chart forFTSE 100 (^FTSE)

Stock markets are funny things, they give the right record of the state of the economy until they don't.

They rise and fall on specific company issues, but somehow reflect the whole market.

They are run by machines, but driven by human emotions and greed.

They are rigours beasts but follow obscure folk law rules like 'sell in May and don't come back to St Ledger's day' - which actually work most of the time.

And then you have the 'Santa Rally' nearly every year without fail the stock markets rise into the New Year, and then nearly every year they give up all the  gains in the first two weeks of January.

This year though the Santa rally is yet to kick in, even if it does the year will be a losing year on the FTSE - dragged down by its high resource sector composition.

A losing year on the stock market when the economy is in reasonably fine fettle is quite a rare trick, not something seen since 2001/2 when the tech bubble burst; perhaps the resources sector bubble is the same type of effect on the market overall which means a slow re-build from here as happened in 2003-2007?

Thursday 10 December 2015

Monty Python's Life of Jeremy

Well beard or no, he's obviously not the messiah and there's every indication he's a very naughty boy.   But the burgeoning ranks of the various People's Fronts for the Liberation of, errr, Hampstead (?) are starting to make headway, or is that momentum ... oh, "Peoples Momentum", I'm sorry.  Another one up today, I see: "Open Labour".  And another along shortly.  All makes work for the website designers.

And for the anti-bullying counsellors.  Not that Momentum intends to bully MPs, oh no.  That sort of thing never happens in the Labour Party, does it?

Anyhow, there is more current relevance in this little documentary - covering the Gemaine Greer spat as well as the splitters - than a whole week's worth of Newsnight.

Wednesday 9 December 2015

Yahoo and Alibaba

Sometimes things are not as they seem.

The world business news is full at the moment of the news that Yahoo is to sell itself, or split itself up or not. All so it can realise the value for shareholders in its stake in Alibaba - the chinese export portal ( I never understood this success, everything I have ever looked at in Alibaba is 100% fraudulent, must just be me who see this).

As with many things mergers and acquisitions in 2015, the whole deal is really about corporate tax avoidance. Somehow or other Yahoo wants to avoid paying any corporate tax on a $35 billion share sale and has come up with various different ways to make this happen. The latest one is the to do the opposite of the last idea but for the same result, paying no tax.

Pfizer/Allergan is the same side of the coin, with a completely real merger created not to drive synergies but save taxes.

Ho hum to all that.

The really interesting thing I have learned though, although can find precious little English language backing, is that Yahoo does not actually own Alibaba shares. Yahoo owns shares in the Hong Kong Listing of Alibaba, which in turn owns the US listing shares. According to Yahoo it owns 35% and has major voting rights. One piece of evidence I can show to prove all this is it took 2 years for Yahoo to increase its stake in Albibaba which is put down to 'deal complexities.'

In reality, the entity listed on the Hong Kong exchange is not the company that owns Alibaba group of companies. It is instead a special purpose vehicle that owns the commercial rights to those companies and thus the profit cashflow.

So to some extent, so what. However, would you be pleased to think you owned a chunk of Tesco plc only to discover that you did not. You owned an SPV with commercial rights. What would happen in a country with limited law around property rights if the actual owners decided not to pay the SPV?

Just as well China has such a developed and transparent legal system so that this may never be tested.

Tuesday 8 December 2015

Glasgow bin lorry and the expensive suggestion


An inquiry into the Glasgow bin lorry crash has found that the tragedy in which six people died could have been avoided if the driver Harry Clarke had not "repeatedly lied" about his history of blackouts. 
 begins the opening and accurate paragraph on the findings of the inquiry into the murderous runaway bin lorry of last Christmas.

The fatal accident inquiry by Sheriff John Beckett listed 8 reasonable precautions for employment of council waste drivers, , which mostly boil down to "The applicant should not lie on their employment or medical forms." And "The employee should check those forms..including checking the medical records."

The NHS  advice is that employers cannot ask for medical records without consent. And the applicant has the right to see the report before it is sent and to have it amended if incorrect. Far too long I suspect. And if a prospective employer refuses to provide the medical information, they don't have to be employed. Another recommendation is not to employ 'subject to' but 'after receiving' satisfactory references. How long would that take? It could be months. 

An old employer of mine used to insist on all references being obtained by the employee within 4 weeks. An almost impossible task as employees cannot navigate the corporate HR bureaucracy or the lackadaisical efforts of SMEs.That requirement was extended to 8 weeks. With still little success it was finally dumped back onto HR where it belonged. 

What is worrying for BQ is the seemingly sensible precautions of

  • Local Authorities and any other organisations which collect refuse, when sourcing and purchasing refuse collection vehicles which are large goods vehicles, should seek to have AEBS fitted to those vehicles wherever it is reasonably practicable to do so.
  • Local Authorities and any other organisations which collect refuse, and which currently have large goods vehicles without AEBS but to which AEBS could be retrofitted, should explore the possibility of retrofitting with the respective manufacturer.
Now hang on a minute....

 This incident involved a refuse lorry. An unusually large and heavy vehicle that operates in public spaces on a stop/start basis. The accident occurred at the absolubte annual peak pedestrian traffic time for Glasgow. Christmas shopping . Monday, 2.30pm, 22 December.  The first day of holidays for the kids and many workers and is the ultimate high street shopping day. And 2.30pm is 'wave two' in retail. The lunch eaters coming back out and the early shoppers on their final few shops, and the latecomers just emerging for an afternoon shop. Couldn't have picked a more packed moment.

The reason the lorry ran over pedestrians was a medical condition. The driver had lied over a number of years about his blackouts. He passed out and drove over pedestrians.

How likely is this event to occur in this way again? What is the cost of the retrofit? Did the Sheriff find that out before he suggested the council hike up the poll tax to ensure an accident unlikely to ever occur again won't occur again?

 The Germanwings plane that the pilot deliberately flew into the alps killed 150 people. 25 times the number killed in Glasgow. 
The solution to that undeclared medical problem was not to have a second cockpit fitted to all aircraft so a pilot could take control from a mental co-worker. It was to have two people in the cockpit at all times.

AND anyway..

EU regulations: 1 November 2015, EU legislation will mandate the fitment of Autonomous Emergency Braking (AEB) systems on most newly registered Heavy Goods Vehicles (HGVs) over 7.5 tonnes. 

So new vehicles will have the device anyway. 

By suggesting, {and its worth noting this was just a suggestion in the inquiry report}, the installment of braking devices, isn't the incident being treated as a likely, rather than an unlikely event?

Mr Cameron Goes to Europe

I try to keep abreast of all the euro-referendum theology via the diligent Dr North, that arch scholastic feuder and splitter of hairs.  But it's a full time job (where does he get his time?) so I may easily have missed a chapter or two of the tangled tale.

Anyhow, it all helps with the background when it comes to contextualising a piece like Polly's this morning: David Cameron’s cabinet saboteurs are pushing him to Brexit
The other 27 members have life-and-death matters to discuss: an unstoppable flow of migrants, terrorists crossing borders and Schengen crumbling, while the euro still trembles unsteadily. Patience with the frivolity of Britain’s pointless negotiation has worn thin. For the first time observers are reporting that Brussels and Berlin regard a British exit as a serious possibility. They don’t want us to go, but Cameron’s cavalier approach pushes them towards indifference. Some report that he himself seems to care less about leaving than he once did, as UK polls sway closer to exit – and he hits a brick wall through his own ineptitude. Why did he make the emotive but empty issue of abolishing working benefits for EU migrants the centre-piece of his renegotiation? His officials and government lawyers warned this was an impossible demand. Other leaders will not, and cannot, in law agree: free movement of labour without discrimination is a founding EU principle. 
Not such an empty issue then, eh?  (This is before we register schoolman North's view that Cameron has made no such demand.)  I could think of several explanations for its appearance on the List, including 'the hand of Osborne' whose student-politics expertise is well up to knowing full well the import of the benefits issue. 

Yes, the 27 would much prefer to be discussing something else, but that's a strong card for Cameron who, as North identifies, is the only one in the game with a strategy.  Single-minded David can often beat Goliath because the latter is preoccupied.  (I once took on, and prevailed against, a former employer - a very large corporation - and was widely thought to be crazy: 'they have infinitely more resources' said well-meaning friends.  Yes: but of those resources they were deploying perhaps one man-hour a day in the persons of one bored lawyer and one less-than enthusiastic HR-wallah.  I was working my side of the issue 16 hours a day, with unwavering commitment.)

And just look at what Polly highlights in her first sentence above.  (She's never been an identikit leftie when it comes to immigration, BTW.)  If as a europhile she's panicking a bit, well, she has every reason to, on several fronts.  I'd say both other corners of the public-opinion triangle - the 'leavers' and the 'let's see what he comes back with-ers' can take a lot of heart from the story so far.  And hey, there's 18 months to go!


Monday 7 December 2015

So what next now the dogs of war are slipped?

So whilst I was in the far East last week, quite a big fuss was made on the news agenda there about this debate that was happening in the UK about bombing Syria.

Firstly, I had hoped to avoid this debate, so it was a bit disappointing to still be assailed with it.

Then the debate, as ever, meant nothing. There is no plan to get rid of ISIS, there semms little mention of unhelpful facts that the Russians keep bringing up like the role of Turkey and then the peaceniks just say war is bad as if that is all that needs to be said.

Anyway, there was a vote and now we are bombing tiny bits of Syria as well as tiny bits of Iraq. Already the blowback has started, with stabbings in London and now in Abingdon today 'triggered' by our involvement.

Where was the real debate about WTF to do about radical Islam in our own country? This surely is the real pressing security need. Wiping out ISIS will be fun and is no doubt nescesary, but it is not the top level defence of the realm requirement.

Indeed, given attacking Syria will likely increase domestic terror attacks (it has already) then surely the most important thing to do is investment and working towards curbing these. Then thinking about the partial source and inspiration - preferably after long chats with friend and foe to find an actual workable strategy.

At the moment, Syria looks a lot like Libya on steroids, in fact had Gaddafi survived he would be a Assad clone for how the West viewed him. Libya did not work out so well, so how will Syria.

Finally, more to the point. How stupid are our politicians? Having the wrong debate about the wrong issues and turning it into a big deal?

Saturday 5 December 2015

Political pet names big political news after UK declaring war..terror attack in the USA .. Oldham success for Labour .. Momentum thuggery ..etc ..was that Corbyn has a cat called  

Chairman Miaow.

That's pretty good.

A different Jeremy got into a spot of twitter outrage  a while back when it was revealed that his pet was called Didier Dogba. The dog was black . And so Clarkson was clearly being racist..This time, no demonisation of him naming his puss after the world's all time top mass murderer.

So now that it seems its acceptable to allow dodgy pet names again, in the spirit of Chairman Miaow,
 - "Let a thousand flowers bloom"

 And we'll have a good old fashioned weekend compo to find

the best political pet's name tags

For the right

Herman Pawring
Adolph Kitler
Rudolph Hiss
Winston Purrchill
Nigel Furage

For the left

Fido Castro
Owen Bones 
Eva Purron
Len McCatsky
Catlin Moran

And don't forget the budgies

Polly Pot
Angela Eagle

Your own feline, canine, avian, piscine,reptilian, murine efforts in the comments.

Wednesday 2 December 2015

The bombing war
In the post World War one world, airforces were the new big thing.
Inexpensive, by conventional navy and army standards,the airmen offered a way to conduct war on the cheap. Cheap to set up. Cheap to maintain. Cheap in casualties sustained by the attacker.

At the end of WW1, he RAF had managed to free itself from the clutches of  the army, and was the envy of other army controlled airforce throughout the world. In order to continue their operation as a separate service, with all the extra admin and senior officer costs that brought, the airman  began promising great things to the politicians. Victory through airpower.
This theory was tested rather widely during the second world war. And despite huge expense in all resources, the results of independent air action remained , at best, inconclusive.

The most credible claim that air power could conquer a nation came from the USA, whose bombing of Japan did result in that countries surrender. Without a single combat soldier setting foot on its soil.
Its likely that the combination of the air and naval campaign, particularly the submarine war, would have forced japan's surrender without the A Bomb. But it would have taken longer.

In Korea air forces were crucial in preventing the collapse of South Korea and in the ability of the UN to recapture half the country. But without dropping the big bomb, airpower couldn't end or even escalate that war.

The Rolling Thunder operations in Vietnam were possibly the last real attempt by one country to force another to surrender by airpower alone. And even with the entire might of the US army and navy airforce available, it was not possible to defeat even tiny North Vietnam.

With the advent of advanced precision munitions, aircraft were able to target key installations successfully, with greatly reduced casualties. The mission statement moved from war winning .. to war containing.

And in this the western airforces have been very successful The Balkans break up...Gulf War One {resounding success for the airforces as indeed it was for all services..A fantastic operation that doesn't get the recognition it deserves as a skillful campaign, largely because it was so successful its imagined the awesome victory was inevitable.} The Gulf invasion II and Libya.

Libya was particularly impressive for airpower. The rebels were at their last gasp. Retreating into Benghazi. They had been outfought by the Colonel's forces and were almost finished. The French and British aircraft began blunting the advance and then just wiped out the Libyan army.
I remember seeing a Sky news report that showed a burnt out T-72 tank. Its turret blown a good 50 meters away. The reporter explaining that coalition aircraft had done for this steel terror. Then the camera pulled back and the road behind had twenty more destroyed tanks. And armoured personnel carriers. And supply trucks.And AA guns and missiles. Miles and miles of them burnt out as during Desert Storm.

Mr Drew commented here a long while ago about how once Nato aircraft were committed against ISIL, that would end their terrain  taking offensives, which it mostly was.
Heavy weapons cannot be used without air superiority, which ISIL will never have. So they are left as militia in an insurgency war.
Many are now saying over the bombing Syria debate, "Bombing won't stop the terrorists."


Bombing from the air won't stop Isis. It won't stop Euro/world terrorist attacks either.
But it will pave the way for the inevitable ground war that must follow, if, as demonstrated above, a successful conclusion to the war is sought. Because air power alone, cannot do it.

Unless that really, really big bomb is used.

Tuesday 1 December 2015

Some Actual 'Prudential' Regulation Ahead?

The usual rule of thumb about articles ending in a question-mark is that the answer is 'no'.  (Nice Grauniad example today: "New generation wave energy: could it provide one third of Australia's electricity?")

But let's not be too cycnical.  So now the Bank of England has been conducting another round of stress tests.
The Bank subjected seven major lenders to a hypothetical scenario that involved a dramatic slowdown in the Chinese economy, prolonged deflation, a reduction in interest rates to zero and a huge increase in costs for fines and legal bills of £40bn. The test found that profits would fall more than than they had done during the 2008 banking crisis – by £100bn by the low point of the hypothetical scenario in 2016 - but capital cushions remained strong enough to withstand the downturn while increasing credit to the economy by 10%.
I have long-held reservations about these banking 'stress tests':  they are rarely stressful enough; and technically, stress-tests should involve a scenario that is a shock to the system, not an ongoing pressure like 'prolonged deflation'.  However, doing something like a stress test is better than doing nothing.

The BoE has reached some conclusions, the headline being rather complacent airy: "The stress-test results suggest that the banking system is capitalised to support the real economy in a severe global stress scenario, which adversely affects the United Kingdom".  Well let's hope they are right. 

But there is a line-item detail that may, just may, cause them to act; namely the easy terms on which buy-to-let mortgages are available (once again). 
While it did not take immediate action to cool this sector - where lending has risen 10% in the first nine months of the year - it said it was reviewing the lending criteria adopted by firms and stands “ready to take action.” It will also be watching the impact of the extra 3% stamp duty announced last week by George Osborne in his autumn statement.
This might, then, be an actual British 'counter-cyclical prudential intervention'.   Correct me if I am wrong, but I think that would be a first -  the relatively new-fangled Prudential Regulation Authority hasn't really done anything at all along these lines as far as I know.

Of course, other countries act in this way from time to time as a matter of course, and were doing so before the crisis.  Our 'PRA' is a belated effort to catch up a bit.  Will they or won't they?