Thursday, 30 April 2015

A Wry Chuckle to Lighten the Gloom

What could be funnier than this?  Silly Alan Rusbridger launches his 'keep-it-in-the-ground' Grauniad campaign, trying to pressure institutional investors to divest their holdings in hydrocarbon producing companies. 

What happens?  The price of oil promptly rises, and with it - strongly - the stock prices of oil and gas companies, as nicely plotted by FT Alphaville here. "The Guardian as contrarian indicator" - an amusing idea.

As the FT goes on to say, there will of course be more to report on this as the months go by.   Plus, the crude price rebound looks a bit overdone.  All the bank analysts are picking the price to increase steadily through 2015-16, but I'd take that as another contra-indicator (not to say self-interested wishful thinking) and point out that the US shale oil (and gas) producers are undeterred by OPEC's efforts.  There must be the chance of another material down-tick later this year.

ND

Uk election - Hollow legions

Party                           Seats
Conservatives               279
Labour                         270
SNP                              48
Liberal Democrats         27
DUP                               8
Plaid Cymru                    4
SDLP                             3
UKIP                             2
Greens                           1
Other                             8

323 seats are required for a minimum majority

A Conservative coalition looks to be made up of Con {279} + Lib {27} + Ukip {2} +DUP {8}  for a total of
316

A Labour coalition of Lab {270} + SNP {48} + Plaid {4} + SDLP {3} + Green {1} for a total of 326
A majority, but a very weak one.

Labour could also add the Liberals to its mixed bag, giving a very comfortable
353
It could also count on Galloway's respect party if it needed an odd one vote sometime.

Unless the Tories can do considerably better than 279 seats, or the liberals hang on to many more of their labour-lib battlegrounds then its highly unlikely a blue coalition could be formed.


So, a labour + Scotland+Wales+N.Ireland socialists arrangement is going to be the government.


Interesting to wonder what would have happened if the Tories had not campaigned for Scotland to remain in the union and the SNP had won its rather disappointing referendum.
Scotland would be voting in this election. But coming out in 2017. leaving the Miliband government with a 30 odd seat minus and generating a new election, which labour would have to win without the SNP or any Labour Scottish seats at all.


All those pundits during the referendum who told us over and over again that Scotland has almost no bearing on any UK laws or election results. How foolish do they feel ?


One thing the Tories could do, though its very unlikely, is to add the SNP to the blue coalition, on a con&sup basis, with the promise of giving them whatever they want. 

Tax raising powers & another referendum.
Cameron could suggest that there be a referendum in 2019, with ALL voters in the UK taking part. So almost guaranteeing a Scottish exit. He could also pledge to fight so Scotland receives automatic EU status on exit.
Then in 2020, with no SNP, he could fight the election knowing Labour would never again have a 59 seat cushion of seats or allied seats to call upon.

Wednesday, 29 April 2015

Can we make money if the polls are right?

There is a website which I peruse regularly called politicalbetting.com. The folk there seem to make a nice turn on betting on all sorts of elections. A very insightful bunch they all are and I wish them well.

The challenge though is that going to a bookie to place a bet is not a fair game. The bookie can refuse large bets and indeed, refuse to take the bets. As such I think to make an decent money a lot of money has to be sunk into the game a long way ahead of time.

Where investment is unlimited is in the equity and and forex markets. Here you can invest what you like in split seconds and trade out seconds later too.

The recent polls point to a very hung Parliament. In fact, Election Forecast appears to have it that no Government will  be formed at all. The Tories on 280 and Labour on 260 mean the SNP can prevent any Government being formed.

My take on this is thus:

- The Pound will weaken 2-3% on this news as it emerges at the end of next week. The Pound has been rising the past month, so for once I can't see that Government instability it priced in. 

- Similarly the UK markets, up at all time highs when the chances are a very left wing socialist coalition will get into power or alternatively that no Government will be formed.

The markets tend to look at past performance and the UK has not had Government formation problems for some time. I am not suggesting there will be a crash, but a couple of hundred points off the FTSE and a small decline in the Pound throws up some interesting potential.

I am on a long dollar/ short pound ETF for starters. Just thinking about which sector will do the worst, likely energy utilities and banks I would imagine?

Anyone interested in following this strategy?

Tuesday, 28 April 2015

Energy Security: Last Refuge of Scoundrel

Ever since I started in the energy business which is *ahem* several decades years ago now, whenever policy matters have arisen a version of Godwin's Law has kicked in and someone justifies their outrageous plans for governmental interference by reference to that hallowed precept, security of supply.  At this point, even corporate types often nod sagely, and surrender the free market argument to the dirigistes.

And almost always they are wrong, wrong, wrong.  It is certainly important to have security (and also just plain old reliability) of supply as an unbending goal of energy; but history tells us that almost always, since there is no underlying shortage - far from it - this is best achieved by rigorously ensuring the unfettered operation of the open market (as written about here several times over the years, with specific examples).  Of course, 'unfettered' is a relative term in such politically-charged commodities as coal, oil, gas and electricity: but the extent to which the markets can be left to work their usual magic is vastly under-rated by all manner of people who should definitely know better.

Anyhow, having just seen the EC sneekily advance its power-grab, the 'Energy Union' under the false flag of security, we now have Ed Balls planning a mini-version of something similar: an 'energy security board'.  In a world of honest policy debate one could look forward to this with a degree of relish (a security board, not a Labour government of course) because it would directly pit the proper concerns of reliable electricity supply against the nonsensical claims of the wind turbine lobby, and the baroque fantasy which is EDF's nuclear offer.  Then we could have all sorts of useful analysis on just how much should the nation be willing to pay for self-sufficiency in energy supply.  (A lot less than the Hinkley £92.50/MWh indexed-linked, I should say.)

However, we all know how the rhetoric works in practice.  Security is important:  gas comes from Russia = evil;  therefore we need heavily to subsidise  . . . . . . . . .  [fill in your favourite daft source of electricity here].  It's all so predictable.

ND

Monday, 27 April 2015

Eco diesel is here!

So not much after the recent discussion around these parts, Audi announces that it has solved the problem of renewable-energy storage and portability: eco diesel et arrivé!

Their base product, which they’re calling 'blue crude' is created using a three-step process. The first step involves harvesting renewable energy from sources such as wind, solar and hydropower. They then use this energy to split water into oxygen and pure hydrogen, using a process known as reversible electrolysis.
This hydrogen is then mixed with carbon monoxide (CO), which is created from carbon dioxide (CO2) that’s been harvested from the atmosphere. The two react at high temperatures and under pressure, resulting in the production of the long-chain hydrocarbon compounds that make up the blue crude.
Once it's been refined, the resulting e-diesel can be mixed in with our current diesel fuel, or used on its own to power cars in a more sustainable way.

 The cost of solar- and wind-generated electricity continues to plummet: solar is becoming more productive faster than even its most enthusiastic proponents predicted.

No doubt the readers of C@W will have an opinion on this.

Money is only confetti

Over a bizarre weekend, the desperation of Labour and the Conservatives in the UK election stakes is becoming more apparent.

Labour worst of all, in a blatant bribe, offering a stamp duty holiday to first-time buyers who spend under £300k (also, who they hell spends more than £300k on their first house - who waits until they are earning £100k odd before buying, really?).

This is another in a string of vote grabbing strategies that ape the Greek model of just bribing voters to vote for you. Labour, under Gordon Brown, have been the champions of this strategy for a long time and have won 3 of the past four elections on the back of it and are well set to win 4 out of five next week.

The fact that 'there is no money' does not matter to those handed out bribes like this. The view these days, very anti-capitalist, is that there are all these rich people and they should be paying. But even if we take the rich list, the total wealth is only £547 billion - this is all their wealth including assets. The UK's annual GDP is £2 trillion. Even with a massive wealth tax the rich could only possibly contribute around £50 billion a year and as we all know, this would rapidly diminish as they leave (in the same way that the rich list just shows how many rich people come to live in the UK, not how well the UK is doing as an economy, few make their money here from scratch).

The Tories are increasingly likely to join in this game, saving some tax cut promises for late in the Campaign.

My hunch is that all of this confetti will cause two things to happen:

1) Desperate policies will be counter-productive and see a rise in the vote for UKIP and SNP.

2) Long term the new Government of whatever hue is not going to reduce the deficit very much and the UK will be left structurally exposed in the next major economic downturn.

I wonder what other giveaways we will be offered this week?

Saturday, 25 April 2015

Light Weekend Reading: Putin Forswears Use of Economic Muscle

Just keeping up-to-date with Putinesque 'corporate communications' on Ukraine ...
 I think we should act so that our partners feel themselves quite confident in our intentions, we should stick to healthy business relations. Also, we have to deepen their confidence that we will never use our economic connections as a tool to lobby our interests, which are not really tied to economics – we’ve never done this before and, of course, we are not going to follow this path in the future.
Oh, and then this:
Russia is building up forces on its borders with Ukraine, prompting pro-Kiev forces and analysts to predict an impending pro-Russian attack in the near future.
Carrot and stick, I suppose.  The lightning encirclement of Mariupol can't be far off now.

ND

Friday, 24 April 2015

Tesco, Leahy, Weinstock and Beyond

Tesco really is the biggest British business story for a while, so no apologies for following on Bill's mega-post of yesterday.

I am interested by the leadership aspect.  Tesco was noted for its clear-sighted strong-men at the top:  Cohen himself, Porter, MacLaurin and of course Leahy.  I met Cohen a couple of times in his dotage - a crusty old chap, I think it is fair to say - and had some slight business dealings with Leahy.  Like everyone else on the planet I was deeply impressed: he struck me as (a) a very straight bat; (b) decisive, if slightly cavalier; and (c) probably very good to work for.

But his legacy appears to have been awful.  Is his a case of getting out before anyone notices you've screwed up ?  - or Weinstock / GEC syndrome, where the successor generation takes a sound business and very promptly trashes it ?

If anyone knows, it would be interesting to hear.

ND 

Thursday, 23 April 2015

IFS say Vote Lib Dem for fiscal rectitude

In a rather strange turn of the events the Institute for Fiscal studies has tried today in vain to tell the public that all politicians in this election are lying and all their Manifesto's are lies.

Luckily, the public are well ahead of them on this.

However, the particularly nice trick they have turned up was to say that the Liberal Democrats were the most transparent of all the main parties! (except UKIP, handily airbrushed out of the picture altogether).

Here is what Liberal Democrat, David Laws ( how exciting if this smug idiot loses his seat in 2 weeks!) said by way of return:

"We get the tick for being more transparent clearly than the other political parties. We've set out in more detail than any other party I think in British political history what we'd do on tax, what we'd do on welfare, what we'd do on spending, which areas would be protected. I think that gives us the credibility where we are saying we would invest more on things like education and the NHS for people to know we can deliver those pledges in government."

Liberal Democrats and credibility - I seem to remember vaguely last time some sort of pledge to students or something.

If the IFS says the Lib Dems are the most trustworthy on economic plans then we should all very rushing out to Tesco to buy as much cheap alcohol as we can to keep us going for the next five years...

Wednesday, 22 April 2015

Tesco has worst results in its history.

Tesco has lost a gazillon-megabillion of pounds. Or , more factually, made a £6.38 BILLION loss.
They have lost about one quarter of the defence budget. Staggering loss.


A few years ago i asked the readers if they really had fallen out of love with Tesco. The response was an almost universal YES. Which was surprising as Tesco was, and still is , the biggest beast in the retail park. So someone must be loving them?

Retail analysts have been giving their ideas on what's gone wrong and also what Tesco needs to do to put things right.
Here are some ideas.

Tesco should consider closing 200 under performing supermarkets/superstores and focus on growing the more profitable remaining 700 stores.

Pretty standard response. Analysts always use the close unprofitable option as first response while we figure out a better answer. Closing stores isn't easy. These mega stores have thousands of workers. They may have leases, although Tesco often own the land. They may not save that much on the economies of scale and distribution run. It all depends where they are and how much they lose. 


“Tesco needs to recognise how much the retail landscape has changed, and adapt its strategy accordingly. It’s been focused on ‘big box cathedrals’


That is true. But it wasn't so true 5 years ago when Tesco was really losing ground to rivals. And Tesco pioneered the Metro shop. People are buying lesss and often. But Tesco does that too. 
Moving away from its 'big shop' units isn't going to help them today when they still have all those units. 

“It’s hardly surprising that Tesco is in this position, when customers can not only buy cheaper in Aldi and Lidl but also get a better customer service, like in-store sampling.

This is the idea that the smaller stores do more samples of their food and brand awareness - promoting products and getting customers involved.  I never like this idea. Its training heavy and requires a higher skilled and more motivated staff to carry it through. Older readers may recall I counseled COMET against this 'superior customer service' idea, which they tried as an answer to online purchases. Comet are no more, whilst Currys, who did a different thing, survived.
Its a hard thing to do. And I can't see selling a lot more of a new type of  cheese will plug the billions hole.

Tesco is struggling because of increased competition.

Well du'h! Does go on to say about the fuel price wars..which is a good point. Also says the clubcard isn't the power weapon it once was and although 40% of people use a loyalty card, they may have more than one. 

And ..it should say ..60% don't use a loyalty card at all.. Tesco needs those 60%. 

 Tesco has an epic database and it should look at how this data be used.

This is interesting. The idea is the consumer has a standing order and a delivery of basics comes round without having to do anything. Then the customer tops up with items that are on the lorry. A sort of mini supermarket that comes to you. Described as a 21st century milkman.
The real idea is to dump hundreds of poor selling products from the stores and have a much slicker targeting of data. 
I'm not wild about the idea except for the bit about data focusing. Tesco made themselves off the back of their use of technology, that gave them an edge over Sainsburys. They could do so again.

Tesco has a number of larger stores that are costing a fortune. So a key priority for Tesco has to be making better use of these bigger stores.

This, I like the most.  If Tesco can find a good fit partner to take space in their gargantuan stores, that lowers the cost of those stores all round. Who is a good fit? I'd be knocking on Primark's door. Or I would if Primark wasn't owned by a rival. But a similar , celebrated clothing retailer.
TK Maxx? Sports Direct? Next ? Or stuff it full of service industry type nailbars, coffeehouses, hairdressers, computer repair, fast and medium food outlets. Get some rental in and some alternative customers. 
M&S and Tesco had a very fruitful partnership a while back. They each took separate units on a retail park, but with a shared atrium. Could do such things again. Halfords needs footfall. Tesco doesn't have much overlap with them.
Or niche retailers. Soaps and gifts. Furniture. Beds. ..

Its an idea. Not easy. But immediate.

Or 

Any ideas that you might have to turn around the retail giant?

Baiting Putin, again

As if Europe hasn't enough problems ... but it's a beast of small brain.  Yes, after a couple of years of deliberation it's decided to proceed against Gazprom for abuse of its dominant position in the European gas market.  Oh, and for good measure Mikhail Fridman has been given the yo-heave-ho from his UKCS assets.

The Gazprom thing is laughable.  No deliberation was required, their actions were (of course!) fully known to the EU competition authorities yonks ago: and the impact of their real but transparent misdeeds has been diminishing steadily since 2009 and the Great European Gas Demand Collapse we have covered here since it started.  A large part of their west-bound gas availability is now 'on the margin', meaning that if they want to shift it they must (to their utter disgust) chase the spot price downwards.  The world is already awash with gas, even before the Japanese re-start their nukes, and there is a huge further increment of LNG on its way over the next couple of years.  China will not remotely be able to mop it all up in the short or even medium term.

In other words the EC has decided to kick the man when he is not just down, but badly wounded.  Political ?   Yes, I think we may safely say that.

So we are back to the childish Putin-baiting strategy we have criticized here often.  Given that Mariupol has not been stormed - as clearly it could have been, any time - it is surely the case that little Volodya has signalled he's had enough for now.  The Gazprom prosecution suit has been, and would remain, available on the shelf at any time.  Has something bad just gone down in unpublicised negotiations?

Or has ISIL been so comprehesively suppressed by the Iranians that Europe no longer thinks it needs to keep its powder dry?  (One notes that recently the brave warriors of ISIL have been more or less restricted to beating up works of art, which may betoken exactly that.)

As observed before, there are no end of opportunities for Putin to retaliate in the cheap and childish game of 'stirring up the hornets'.  The ghastly situation in Libya is obviously yet another.  How horribly stupid is EU foreign policy.  

ND

Tuesday, 21 April 2015

Where is the English party?

Anyone else fed up with this election campaign?

I may have been hallucinating, but I am fairly sure that early on 19th September last year, the Prime Minister stood outside his official residence and declared that now was the time for England's voice to be heard. We were to have, he promised, reform, in lock-step with the new devolved powers promised to Scotland by "the Westminster parties" in "The Vow".

Now I would normally be the first to say that constitutional reform ought not be rushed, I am naturally an evolutionary not a revolutionary. And yet, somehow, huge reforms to Scotland's devolutiom settlement have been rushed through since September. And not a peep about reforms for voters in Emglish constituencies.

So now we are stuck in this ludicrous election death-spiral where every party is campaigning to keep the other out, without a hint of why their particular blocking majority might be preferable to another?

The Tories seem to have given up. No longer are they campaigning for tax cuts or housing costs or the feelgood factor, their election campaign seems to have collapsed into " get Sturgeon". How pathetic.

There were a few short weeks over the autumm/winter where everyone thought that the Tories would kill Labour with their "English votes" policy. Yet now, Miliband's pathetic "constitutional convention" may be the only vaguely realistic proposition.

If the Tories suddenly woke up to the reality of being the English party, they could probably win this election outright. As it is, still wedded to their Victorian patriotism, they won't. So probably someone else will, and when someone does start campaigning for the English, they may not be quite as cuddly.

ps: I have just received my first pay-slip of the new tax year. Despite the Tories' trumpeting of tax cuts, my take-home pay this month is marginally less than it was last month. Vote Conservative.

Will Tsipras win the election for Cameron?

I come back from abroad for a couple of weeks and realise there is a complete left-wing take-over of the UK in prospect! Blimey!

The first thing I see is a group hug on the telly of three loony-left non-English women all high fiving because they have been discussing magic money tree economics and saying Farage is a racist and Tories eat babies.

It's like a form of weird time travel to the early 1980's militant timezone.

Worse for the forces of the Right, the Tories seem to have forgotten about sound money and campaigning on their successful(ish) economic record in favour of attacking a Labour and the SNP - which just by doing so is giving them more legitimacy.

Even weirder in this bizarre world, the opinion polls which now appear daily like cluster bombs, are showing precisely no changes to anything with all the Parties stuck on around the same likely voting figures for months on end. The very definition of hot air.

So we await a so-called 'Black Swan' an event to change the dynamic of the election. As ever, this can be anything from a major disaster to a Foreign Policy issue or even a Royal Baby.

The only one I can foresee happening is the rapid end to the Greek stand-off. Domestically the Greek government is very popular just at the time when the EU is rallying to Germany's side. The QE in Europe has sucked up so much of the bond market that there is confidence that a Grexit could be contained and managed.

This may be misplaced, maybe not. Certainly I do not believe a 10% fall in UK GDP from Grexit that some of the madder Euro-enthusiasts like to spout.

However, the money is due to run out in Greece in mid-May and even now the Government is hoovering up money from local authorities to try and keep the salaries and pensions paid. This is desperate stuff an may not work.

A sudden Grexit or the panicky build up to it in Early May would surely be a big boost for the Tories - on a no change and sound economic management platform - maybe enough to get them to largest party with a minority Government. Logically, UKIP should  benefit to as the overall insanity of the EU is exposed further for the damage it is doing to constituent member countries who happen not to be Germany.

It's a sad state of affairs for right wingers that we are left hoping for this to avoid a Communist take-over...

Monday, 20 April 2015

Bill Quango's ring tone of choice.

For DJK.
It certainly does beat ours and the French. The Germans can give the Russians a run for their money..but can't beat this.

I guarantee if you have a phone and can't hear the damn thing ringing .. switch to this and even if you don't hear it, all the other passengers on your train staring at you will ensure you realise your phone is going.

Nicola Sturgeon Coalition Blues


It’s here for you, Madame Nicola 
Mili loves you more than you will know, whoa ho ho 
We're here to please, Madame Nicola, 
Coalition beckons any day, hey hey hey 

We'd like to know a little bit about your tough red lines 
We know you’re keen to help yourself 
Look around you, all you see are panic-stricken eyes 
Stroll in Downing Street until you feel at home 
Coo-coo-ca-choo, Madame Nicola … 

On a TV sofa on a Sunday afternoon 
Being in the candidates' debate 
Lie about it, tease them with it 
When you get to choose 
Every way you look the English lose 

Where have you gone, Margaret Thatchio 
Our nation turns its lonely eyes to you, whoo hoo hoo
What's that you say, Madame Nicola 
Maggie T has left and gone away, hey hey hey 



_______________  
© Nick Drew 2015

Sunday, 19 April 2015

Sunday counterfactual

David Cameron's Conservative party is on course to form a majority government after the upcoming election, as the Tories ride high in the polls.

Electoral experts describe as "bold" and "forward-thinking" the changes to the voting system introduced by the Conservative-Liberal Democrat coalition government of 2010-2015.  The deal between the two parties made in May 2010 has resulted in two interlinked reforms: the constituency boundaries have been reset, so that each district has roughly the same voting-age population; and the "alternative vote" system will enable the mainstream parties to capture the votes from the protest parties of Left and Right.

UKIP have been buoyed by comments by European Union leaders suggesting that Cameron's plan to make significant changes to the treaties are unlikely to be made in time for his December 2017 referendum deadline.  Nonetheless, UKIP's leader Nigel Farage suggests that the best hope of leaving the EU and re-asserting Britain's national sovereignty now lies in voters giving their second-preference votes to the Tories.

Meanwhile Britain's Left are languishing as voters repeatedly tell pollsters that they do not want to see Ed Miliband as Prime Minister.  Left-leaning voters are queuing up to support the Greens and other minor parties, but seem unwilling to give their second-preference votes to Labour because they regard him as weak and incoherent.

Nationalist politicians in Scotland and Wales are also riding high, but warn that there will not be enough separatist MPs in Parliament to effect what SNP leader Nichola Sturgeon calls "real change" unless English voters switch to Ed Miliband.

The Lib Dems have increased their list of target seats and seem likely to gain at Labour's expense, thanks to a combination of their perceived successes in government, and the strongly-recovering economy.  Their leader, Nick Clegg, who is unrivalled in his party, has argued - apparently successfully - that his party constrained the urges of the Tory Right in its plan to slash public spending during the last Parliament, and that decision is largely responsible for the present upturn in Britain's economy.  This view was reinforced by a recent IMF report which praised Britain's "balanced approach" and by comments by Germany's finance minister that Britain is "an example for other European countries to follow".

Financial markets are bullish about a Conservative majority government, or a continuation of the Coalition, and there are few fears of a shock Miliband victory.

Friday, 17 April 2015

Mr Putin's Strategy Prevails

Watching as much as I can bear of the election coverage it is striking how ineffective almost every gambit seems to be.  Fairly dramatic policy commitments are launched; incidents planned and unplanned strike the news editor's desk with enough force to command headline coverage; mighty gaffes are perpetrated; claim, counterclaim, downright lie and outright abuse are hurled; and all disappear from the scene in a welter of newly-minted nonsense, with a half-life of about an hour.

Postcard from Hell
It has been suggested that Mr Putin's over-arching strategy for managing politics in the era of the interweb (over which he exercises a lot less control than his Chinese counterparts) is to bombard all media with such a cacophony of high volume noise, the less coherent the better, so that confusion reigns and nobody believes anything.

(Nearer to home, I'd say that recent UK exponents of media management such as Campbell, Mandelson and Clifford, all essayed a similar strategy - but episodically; smokescreens deployed reactively at times of particularly awkward embarrassment for their clients and masters, rather than as an ongoing 24/7 way of life.  Modus operandi, rather than vivendi.)

Under the Putin doctrine the incumbent power is presumed to be the beneficiary as no opposition ever gains traction.

I wonder if Cameron, by design or otherwise, is in line to benefit from the same?  He doesn't even need to generate the hubub himself (though the Tories play their part) - his opponents do it for him, which might even add to its charm.

A good weekend to all.

ND

Thursday, 16 April 2015

The debate of the 2nd division.




The five party leaders not currently in power just had their debate. Though not much debating went on.

More a load of unsubstantiated claims. Counter claims,. Accusations and shouting. They started off by all unanimously attacking Cameron, who decided against appearing. Clegg and the liberals got away Scot {SNP} free. Possibly as all of the people behind podiums know they are going to need the Liberals if they are to form a coalition.

Once the attack the Tories was out the way , it was 4 vs 1. And that 1 , was Miliband.  The danger was always that the Labour leader would represent the existing establishment. he was accused of being in favour of austerity and immigration caps and not spending on the poorest..
This was a very left wing audience. And Miliband had to make sure he stuck to his centrist-left of centre stance and not be forced into a who's more 'progressive ' argument.
{All four left wing parties used 'progressive' 4 or 5 times in their opening 1 minute address. I was hoping Nigel was going to say he was a regressive. Just to wind the others up.}

Miliband did well. He was perfectly sound. He was attacked from the far left, for not being socialist enough. And from the right by UKIP.  But he may well have been better to have followed Clegg and Cameron and not appear at all. It would be like Cameron debating 4 Farages. Not worth the risk of being cast as a metro middler. I suspect if Miliband was in a stronger polling position he wouldn't have had to do this debate.

Sturgeon was strong again. Offered Miliband a sort of Von Ribbentrop-non-aggression pact where they would defeat the Tories together. he sort of declined..sort of.

Bennett was as incoherent as ever. Takes a breath in when she should be expanding out. A poor speaker and a poor debater. She even mentioned Caroline Lucas at the end. To remind us they do actually have a more popular and much better spokesperson.

Leanne Wood was alright. If you like that velvet glove sounding communism. Her party is  as barmy as the greens. She said "Wales has millions in poverty." Mostly caused by her lot, If her policies are anything to go by.

Farage ..well, if I was his adviser I'd be furious with him. He attacked the others. Attacked the audience. Attacked the BBC who was hosting the debate. Attacked the audience. He came across as angry, bigoted and unpleasant.

Unless you are already a supporter. In which case he came across as determined, focused, unyielding and right.

For me , I would have used the opportunity to try and gain new UKIP supporters. UKIP seem determined to just keep reinforcing the beliefs of those they have.

On the audience, Farage called it a typical left wing audience. 
And it was.
 Dimbleby stepped in to say that the audience was chosen by a polling company to ensure a balanced reflection of the parties speaking. 
So Farage was right...80% left wing. It certainly seemed that way. But no one wins a contract by shouting down the client.

Why does the BBc have it's own special definition of balance that differs from the usually agreed one? 

Anyway.

 Nigel didn't even try to win over the studio audience. He was only interested in the TV one. I doubt he won many undecideds over. But he has a knack of playing wild cards and winning. i thought he was poor in the other debate. But UKIP saw a slight up swing. Today he got a million quid from the Daily Express, so he will be celebrating regardless.
Though what can he do with that cheque? The billboards are booked up. The TV ads done. The flyers one out. Postal voting begins tomorrow. Its a bit late for anything now.

Over all ?

What did we learn ?

That Cameron and Clegg safely watching at home and laughing themselves to tears made the right decision to completely avoid this ultra left bun fight.

Wednesday, 15 April 2015

Money's too tight to mention

The base rate in the UK has been stuck at 0.5% for years; in the US and Japan the equivalents are close to zero; even in abstemious Germany, the central bank is practically giving cash away. The Swiss and German governments are able to charge people to lend them money for up to ten years. UK mortgage rates for the safest borrowers are at all-time lows: both First Direct and Nationwide are offering ten-year fixes at 2.89%.

Easy money, right? Possibly not.

Saint Milton tells us that low nominal interest rates may tell us that monetary policy has been too tight, and high rates do not necessarily mean that money is too tight.  So is money too easy or too tight? Are low interest rates storing up trouble or are we sacrificing growth because our monetary generals are fighting the last war?

Mark Carney and Mario Draghi say that Europe is on an even keel, but UK inflation is at a modern-era low. Carney says that the only way up, baby, for UK rates, but committee colleagues are not so sure. Keynesians are still calling for fiscal stimulus.

So how can we decide what to do?

In 1933 the US government started down the road towards the paper-money era, but it took until 1972 for the post-gold regime to be formalised. For nearly 20 years after that, western nations experimented with various regimes, some more successful than others. In Britain we suffered from micro-managed money-rationing, to wage-price regulation, from hyper-inflation, to economic breakdown; we "shadowed" the Mark, during a period of great divergence between our great nations, and we narrowly avoided joining the Euro. But since 1992 the UK has enjoyed ever more stable inflation and huge long-term reductions in interest rates, thanks to inflation-targetting by the Bank of England.

But with the rise of China and the others, suddenly inflation is not what it used to be. A boom in Britain does not cause a wage spike as it used to, because so much is imported. Even though GDP is rising at a heady clip, average wages are fairly stagnant. So the question remains: how do we know when we are booming or bust? Does inflation targetting do now what its inventors aimed for?

Enter "nominal GDP targetting". Nominal GDP is a measure of the total amount of spending in the economy. Experts seem to think that to avoid hyper-inflation and debt traps it ought to be kept to about 5% a year. In times of proper growth, inflation will fall as productivity soars; in less prosperous times, real growth will falter, and inflation will rise, but never too high to cause difficulties.

Mark Carney is keen on NGDP, and his views seem to be based on the UK's healthy but sustainable NGDP numbers. The US apparently does not enjoy such a healthy situation, and so money is too tight there. The eurozone needs to fire up the printing presses until they run hot.

Don't be surprised if the next UK government moves towards NGDP targetting, whoever wins the election.

Tuesday, 14 April 2015

Right To Buy 2: not quite a work of genius ...

...  but it is passably interesting.  

Everyone knows (or thinks they know) how popular RTB1 was.  Lots of people who won't remotely benefit from it, see it as an (accepted) token of True Blu-ism, an appropriately deferential and umistakable piety towards Mrs T and the hallowed Property-Owning Democracy.  It fits with all known marketing wisdom, as practised by Hollywood, West End Theatreland, chocolate manufacturers, automobile brands etc etc: stick with what you know they like ("pre-sold", in the jargon) and serve it up again.   "Brand extension" - there you go, that's another one.

Oh, and it could represent an actual, realistically-available, once-in-a-lifetime, 'life-changing' windfall for several hundreds of thousands, who may remember (or others in the family certainly will) how Uncle Bert really did make out like a gangster with RTB1 twenty years ago.   And no-one but the Tories will offer it, so ...

Did I mention it's actually, and everyone knows it, real?

So it looks like Good Politics.  "It's not funded" is a pretty lame response in the circumstances.

I'm guessing Miliballs and Clegg (a) kinda saw this one coming, and (b) rather hoped it wouldn't.    Forewarned isn't always quite forearmed: knowing that when someone kicks you in the shins it hurts, doesn't stop it hurting when they do actually kick you.

ND 

Monday, 13 April 2015

BBC prepares for change.


From : BBC Digital Political Involvement.
To: BBC All Channels, services and digital spectrums.

Communications reminder memo

In the likely event of a Labour outright majority, or a Labour coalition of parties,
please be advised that under the terms of the BBC charter and the broadcasting and media act, 1998, that under a socialist government or socialist coalition, please revert to using the standard policy descriptions from your 1997-2010 synonym application sheet contained in the Cambel-Mandel dossier.
This must be used from May 8th until further notice.

These docs should still be within the files and on the cloud under the heading CambelMandel Approved. However a new, updated 2015 sheet will be issued to you shortly, along with the champagne.

Special care must be taken to ensure these changes take place on Newsnight, The Today program and the News at Ten, on May 7th to guarantee no slip ups!!




Cynthia Ambroria-Penrose
Vice Deputy Assistant Head of Digital Political Involvement.
BBC

Keep It In The Ground? - you can stick that ...

At the first mention of possibly significant oil reserves in the Weald - and not even shale oil, no fracking involved - out come the 'Keep-It-In-The-Grounders'.

What's all this then?  Well, outgoing Grauniad editor Alan Rusbridger, stricken with guilt that he hasn't used his organ more extensively for campaining, has decided to go hell-for-leather for green activism in the run-up to Paris, under the comfortingly simplistic Keep-It-In-The-Ground banner.

This stuff makes me smile.
The discovery of massive oil reserves in south-east England represents a threat, not a bonanza ... the UK’s Climate Change Act commits us to regarding all shares and financial products dependent for their value on fossil resources as unusable “stranded assets”. 
I think not, whatever silliness Mark Carney may indulge in from time to time: although there could (I suppose) eventually be enough of a movement against institutional investing in oil & gas shares to improve the yield for those who see matters a bit more clearly; stranger things have happened.

In the meantime Molly Scott Cato, "professor of green economics at Roehampton University and the Green party's finance speaker", author of the above twaddle, may care to visit the lovely county of Dorset.  There she will find - or rather, she probably won't find because it is essentially invisible - Europe's largest onshore oilfield, Wytch Farm.  Cleverly developed by BP (now owned & operated by Perenco), it is a model of sensitive oil production.  Few Wealden landowners would have any qualms about another of those.

If it's there, it'll not long be kept in the ground.

ND

Saturday, 11 April 2015

Weekend Reading: a Pithy Essay on Fundamentalist Islam

This essay could be read alongside the earlier weekend recommendation on understanding ISIS.  The title of this pithy second piece is Sayed Qutb, Islamic Extremism & Philosophy and the author, one Arif Ahmed, is a lecturer in philosophy at Cambridge.  Not so sure about its specifically philosophical credentials; but it's an illuminating summation of key doctrinal points with a crisp, rationalistic critique.

Particularly salient is his comparison between what Qutb espouses, and communism and other systems that brook no constitutional constraint or higher authority:
 ... there is no deity except God. It is supposed to follow that all political authority belongs only to God. There is no other legitimate authority. ‘No sovereignty except God’s ... no authority of one man over another, as the authority in all respects belongs to God.’ The effect of this doctrine is to render illegitimate every political system that has ever actually existed on Earth*, with the sole exception—Qutb thinks—of the very earliest generations of Muslims ... the affinity of the Islamic fundamentalist movement with totalitarianism, by which I mean a political arrangement in which the state ideology controls all aspects of its subjects’ lives.
He's drawing attention to something alien.  This is not merely so because we are prone to wilful individualism and sometimes outright disorder (although we are): in Christian lands we have been specifically sanctioned to render unto Caesar, meaning that there can indeed be legitimate spheres of secular, temporal authority.  Since at least Cromwell's Commonwealth (if not quite Magna Carta), this has had concrete and practical validity for us.

Ahmed himself would take matters still further: he is an atheist, and doesn't mince words on the system he's explaining for us. 
This difference has nothing to do with the materialistic values of the West. What it reflects is the spiritual superiority of the West. In aspiration if not always in fact, each man or woman is a free individual who should be able to choose both what matters to him and how to pursue it. ...When George W. Bush said in his address to Congress that they hate our freedoms, he put his finger on the deepest difference between Western and religious fundamentalist views of life.
Not everyone would regard GW as a definitive source on the maintenance of freedoms, but the point is made.  As with the ISIS essay, one could imagine those whose beliefs are being summarised would agree with the account: but they may not take kindly to the critique.  Perhaps intellectual life in our better universities isn't so craven after all.

ND
_____________________________
* see, for example, this recent piece from the Inde: or search on Muslim and vote

 

Friday, 10 April 2015

Living with the parents


Under new proposals from the Liberal Democrats, adults who are still living with their parents would be able to claim a loan of up to £2,000 to move out and rent.
The party says the scheme could help people in work aged between 18 and 30 to acquire the deposit needed. 

That's nice. The Liberals returning to their cuddly, helpful, friendly party roots. 
Helping out poor, struggling young people who cannot afford to save up for the deposit for their rented accommodation. Can't save because they are paying rent to their or their partner's parents.

Now .. £2,0000 is £20 a week for a year for each half of a partnership. Or £40 for a single.
Which is quite steep to find to save. 

But what's steeper is the cost of living out of  the nest. I doubt many of us have ever been as disposably incomed as when we had a decentish job and lived at home.
So if these people can't afford to save the £20 a week before they move out  ...  then they can't afford to move out.

Because no matter what  rent they are paying to mum and dad, it surely won't also be including council tax. Electricity. Gas. Phone bill. TV licence, service charges or contents insurance.

It won't include that sudden 15% addition to the supermarket bill of toothpaste, toilet roll, soap, toilet duck, flash, Mr Muscle, Timotei etc.

And the forgettable, rarely used,  but necessary drawers full of light bulbs, batteries, screwdrivers, sink plunger, torch,candles dusters, polish, laces, cotton , string, wire, and such.
Nor the collection of saucepans, woks, microwave , towels , bedsheets, cutlery, lampshades,pillows, bath mats, funky shelves, various pots and vases. Enough scatter cushions to bury you in an avalanche if they tumbled off the sofa and other similar household goods.

Now all this junk doesn't need to be bought all at once. It accumulates, along with hardly ever used appliances, mysterious plugs, adapters and leads of unknown purpose.Keys without locks. Instructions for long expired gadgets. Hardware tools of dubious use. Various strengths of tubes of glue. Pots of solid paint.,broken jewellery and watches, old phones, discarded tablets and desktops. Monitors that will never be plugged into anything again and a bottle of  'No More Nails', used just once before you discovered it lacks the adhesive quality to even stick paper to other paper and has no chance of sticking a wardrobe back together.

But it still has to be bought. A few pounds at a time.

If the youngsters cannot save a £1000 a year whilst at home, they should stay put. Because otherwise all this policy will do is to put them into a rental they cannot afford with an additional £2,000 of Lib Dem loan that they must pay back as well.
.

Wednesday, 8 April 2015

Shell and BG: Big Business As Usual

Shell's agreed bid for BG has a nice, conventional feel about it - in the context of the oil-price cycle.  We know how to assess this one. 

The various bits that spun out of the old British Gas at demerger in the mid 1990's - BG, Centrica and Transco - all performed much, much better individually, a great endorsement of the split-up strategy.  And they all stayed British ! - which pleases several hardcore C@W commenters.  Centrica remains independent, and Transco went to National Grid.  The big 'Rough' gas storage facility was sold by Transco at an early stage to Dynegy of the US, but bought back in by Centrica a while later.  Does Shell count as sufficiently British to satisfy this atavistic concern ?  Personally I care rather little.

BG was always an interesting company, with assets all over the place.  Trinidad LNG production was once the jewel in its crown, plus a bunch of North Sea gas assets it was not permitted to manage proactively while still part of Old-Monopoly-BG, so it let Amoco (of Chicago) operate them.  More recently it has done good pioneering work in Brazil.  It has long been a target, periodically: and the logical acquirer is a company that really knows how to manage (and value) this lot.

Shell's move is an attempt to emulate BP circa 1998 and call the bottom of the market.  BP, it will be recalled, triumphantly called that particular bottom at $10 and bought Amoco, Arco and BurmahCastrol before anyone else had settled into the starting-blocks.  I have a feeling Shell have moved just a tad too soon, but they may not much care.  This type of deal is 'business as usual', a bigger version of all the little shale-company acquisitions that will happen when their hedges expire and the banks press for debt to be serviced.  Creative destruction - the reason it's hard to suppress capitalism.

[By the way, Shell missed out altogether in 1998-99 mega-takeover binge.  I can reveal that they seriously considered buying Enron!  - but they couldn't understand the books.  In 1998 those books were still just about comprehensible to those who grasped mark-to-market accounting (not Shell, that's for sure).  Of course, three years later they made no sense to anyone ...]

Centrica is even more interesting.  Gazprom is perenially rumoured to be eyeing it for acquisition, but as I have often written here, that's always been bullshit: they never pay cash for anything (and they have even less of that now than usual).  Of course, Centrica is a midstream+retail business, so depressed hydrocarbon prices don't automatically make it a target.  It's twice peaked at around 400p, in 2007 and again in 2013, but has been on the slide for 18 months now.  

Its portfolio weighting is still UK-heavy, with all manner of daft and complex 'obligations' and regulatory constraints as one of the 'Big 6' retailers and a major player in UK power.  Who can see their way through that minefield?  You can never rule out some middle-eastern SWF or far eastern utility with more money than sense.  It has often been said that HMG would block a Russian bid - an empty observation, see above - but what would they say to Qatar or Malaysia?  I really don't know.  

I'd say - if they are offering the usual 180 cents on the dollar, why ever not? - and I hope my pension fund agrees.

ND

Forward Britain!


Irrespective of what happens to the oil price, the trend is towards more and more fuel-efficient cars.  We may be on the cusp of an electric car revolution.  A recent Economist article (sorry, can't find the link) suggested that in California there is enough solar electricity to make electric cars more financially viable than the traditional petrol-powered variety.  This is astonishing if you think about how little petrol costs in the US.  I recently had the opportunity to visit Norway, which is apparently one of the largest markets for Tesla cars, no doubt thanks to the fact that the Norwegians have developed huge quantities of hydro-electricity to sit alongside their oil wealth - some of which is to be exported to the UK via a North Sea interconnector.  So in contrast with the UK, where electric cars simply displace pollution from towns to where the power stations are, in Norway and California making the switch may be a net carbon gain, and could be elsewhere are we move towards more renewables and less fossil-burning.

A major shift from petrol- and diesel-based transport has the potential to be disruptive, especially if it happens relatively quickly.  The profile of electricity usage might be altered quite a bit if lots of people start charging their cars overnight; governments reliant on fuel-tax revenue are going to have to think again; and the ecological objections to road-building and suburban sprawl will have to be refined. If you add in computerised cars needing little or no human responsibility, and we may be looking at a significant revival of the fusty old motor car.

It will be hard for governments to justify taxing the living daylights out of ecologically-sound vehicles in the way they have done for so long with the proverbial gas-guzzlers.  Fuel taxes make good sense when the fuel is imported and burning it imposes so many external costs, but losing them overnight would trash a rich seam of income for the Treasury.  I recall a former Prime Minister telling us that the NHS would suffer if he gave in to populist demands to cut the fuel duty.  And the roads will still need to be maintained even if Google is doing the driving.

Privatise the roads

Selling off the UK's network of main roads could remove some of the financial risk on the part of the taxpayer during this transition, and raise a huge amount of capital to reduce the public debt, and even Ed Balls might admit during a quiet moment of contemplation that we need a bit of public debt reduction.

And before anyone starts telling me that privatising the roads is part of a hard-right ideological agenda, tell me who the most free-market transport leader has been in the UK? None other than Red Ken of all people.  OK so Ken did not actually sell off the tarmac to the Canadian teachers' pension fund, be he did finally introduce the much-anticipated (planned since at least the early 1970s) London congestion charge scheme.  The technology that Ken introduced was clunky and expensive, but it worked.  Since then the gizmos have moved on, and nobody even needs to buy a ticket these days.  As far as I know, one only needs to register once and then the charge is debited automatically on days when the zone is entered.  I don't claim to be an expert, but I imagine that if the system was full of holes we would know about it. There aren't even any toll booths!

So let's take it as read that even a complicated and busy island such as this could organise a charging system for trunk roads and even other city centres without too much difficulty.

Road charging also raises the possibility of traffic smoothing by encouraging those who can make a choice to travel at non-peak times to do so by using price signals.  Link this to smart vehicles, and I can imagine your limo-hailing app advising you to wait half an hour to save a few quid on your journey.

Self-driving cars would not eat into the working day (we could do some reading on our way into the office), they ought to be very much safer on trunk roads so enabling a potentially big increase in the speed limit at off-peak times, and they ought to be much better at dealing with heavy traffic as well.

The future's bright.

Tuesday, 7 April 2015

SNP in Westminster - A changing perspective

Not so long ago Channel 4 made a useless documentary about how Farage and UKIP swept to power and were then abject and racist. What else to expect from such left-leaning media?

Yet fast forward just a couple of months and instead what do we see. A nationalist party poised to hold the balance of power in Parliament...only its not UKIP, its the SNP.

This present huge challenges to the UK media reporting. After all, they are near unanimous in their hatred of UKIP - even the right-wing press wants to support the Tories and the left wing just paint a bogeyman.

However the SNP are signed up communists and red to the core. I dhave not see Nicola Sturgeon's recent performances but no doubt they are the same as ever, help the poor, tax the rich, hate the Tories and all will be well with the help of the oil revenues magic money tree.

This is a message that always has a superficial appeal to many voters who are not troubled to think of how money and fortune are created nor of what the rewards for labour and fecklessness are in nature.

Together with the '45%' of voters in Scotland who voted for Independence, the SNP are well on course for 40-50 seats in Parliament. At that rate it is hard to see either a Tory or Labour majority as even possible. With 35 odd other seats going to the rest of the parties, this leaves only 575 for the two main partied to split - so around 285 each it would seem. With the Tory and Labour level pegging this is very much how the election is shaping up.

What will be fun is the Tories having slightly more votes and seats than Labour, but the SNP holding the balance and only working with Labour. An Ed Milliband minority Government with SNP support from Salmond and Sturgeon.

I can't see that lasting long and if so a second election will have an even freakier result for sure as English voters possibly plump for their own nationalist party to vote for.

What policies would a Labour-SNP coalition go for - surely there must be some real crazy stuff in their beyond a big extension of the mansion tax?

Monday, 6 April 2015

Gotta Love The French

Shortly after the banking crisis a French government official openly lambasted the country's treatment of visitors.  France, he said, was notorious the world over for the sullen way in which foreigners' well-meaning attempts to speak the language were greeted, the unhelpful responses to simple requests for information or assistance.  We need the tourist dollars, he said, and this nonsense has to stop.

I don't know about you but my observation, calibrated over forty years of continuous experience, is that this injunction pretty much had the desired effect.  Italy is still friendlier, but France - particularly Paris - has been transformed.

How reassuring then to find a bastion of the true Parisian spirit.  For the first time in a while I visited the fine Musée de l'Armée at the Invalides this week, and I can report that they stage an accurate historical re-enactment of traditional Parisian dumb-insolence, circa 1980.

(At the other end of the building however, the attendants at Napoleon's tomb in the Dôme des Invalides were letting the side down badly, being cheery and helpful.  They were Poles, though.)

The Musée is great.  Its treatment of the Seven Years' War is concise:  "The battles were inconclusive.  France ended by losing nearly all its overseas possessions."  How apt.

ND

Saturday, 4 April 2015

Iran: Green Shoots on Good Friday

The question posed in CU's excellent post last week - Is an Agreement With Iran Wise? - is a whole large step closer to being operative, after another Good Friday agreement of potentially enormous consequence.

As Easter approaches, the optimist in me sees quite a lot of very welcome green shoots appearing in significant places:
  • further downward pressure on oil (though $20 seems a tad unlikely):  $50 for half a decade would be great for getting growth back on track
  • as a piece of pure schadenfreude, it would also annoy the greens a lot:  coal will be phased out all the quicker in the West, being displaced increasingly by gas rather than renewables (not so much green shoots as shoots greens ...)
  • Iran, potentially a much more civilised place than certain of its neighbours (significant numbers of the middle classes there have been educated in the West) can be encouraged to take that path
  • this, as one of our Anons noted on Monday, means lots of business opportunities for both sides: business that western oil & gas companies really need
  • a more mature approach to foreign policy might start to suggest itself to the US and EU, meaning (as Suffragent commented) getting round to the issue of Putin, who really must be allowed to rejoin the mainstream.  At $50, he'll be willing to make the odd pragmatic concession, too
There will be plenty of people quick to observe that, once again, western policy in the region seems to be All About Oil.  To a certain degree, that's true - so what?  Lefties and their new greenie friends - who could find themselves a bit lost for words on this deal, I should imagine - had better just grow up a bit.  That, or just go back to chanting something or other in the corner and let the grown-ups get on with it.

ND

Friday, 3 April 2015

All Things to All Men at Easter

An outbreak of high moral purpose from our politicians at Easter, which seems appropriate.  But they all find it quite difficult to 'do God', don't they?  Premier Christianity has managed to get the Paschal interviews, and it would be unkind to fisk them rigorously.  Gently, then ...

Cameron would urge his critics in the Church "not to dismiss the people who proposed those policies as devoid of morality – or assume those policies are somehow amoral themselves."  This is an important point about ethics and practical politics, though he's put it rather defensively where it could have been more forceful.  But I suppose we are all resigned to suffer in gracious silence ignorant leftist sermons from earnest leftist clergy. 

He follows with a comment that has clearly been crafted carefully for the occasion.
As Winston Churchill said after the death of his opponent, Neville Chamberlain, in the end we are all guided by the lights of our own reason. ‘The only guide to a man is his own conscience; the only shield to his memory is the rectitude and sincerity of his actions.’ 
That notion could - if anyone were so minded - be the cue for a decent philosopical and religious discussion.  (Some years ago, when heavily provoked by St Tony of Blair, I let fly with a few related thoughts of my own.)   But that's about as deep as it gets.

Miliband, we learn, is Jewish, but it would seem this is a convenient technicality.
My dad was Jewish, my mum is Jewish, and obviously I’m Jewish. What’s important for me is the word ‘respect’ ... I’m clearly not going to claim that I ‘do God’, 
Ah yes, respect.  And we are not to take Clegg's atheism as anything too 'vociferous', either.
I have quite a complex attitude towards faith. My family is infused with faith ... I now accompany [my wife] and the children with great joy to mass pretty well every weekend. I sometimes think it must be the most wonderful thing to be infused with faith. It’s not something that has happened to me yet.
I think we get the picture, sunlit and infused.  But as we tactfully disengage from these airy vanilla confections, what is that ominous rumbling in the distance?  Lo - it's Boris on a moral mission - his "personal vision of 'moral purpose' in business and politics".  Given that this was being reported on April 1st, one needs carefully to assess exactly what's going on here: but we can quickly tell how serious is his 'purpose' from the opening words: 
When I was quite a young man in Wolverhampton ...
Ah yes, Wolverhampton, spiritual home of Boris Johnson, he's forever harking back to it isn't he?  (I think he has a little weekend cottage in nearby Dudley: and such a shame he couldn't find a Parliamentary vacancy there).  Morality is to Boris what Courage is to Gordon Brown: the more they write about it, the more we know that they know that there is a bit of a - how shall we put it? -  local deficiency to be papered over.

Ah well, the election will be here soon enough and we need to gather our strength.  A sincere Happy Easter to all our readers!

ND

Thursday, 2 April 2015

$20 Oil? Quite a Prospect

Agreement in Lausanne to restore Iran back into the international community could easily trigger a further sell down towards levels around $20 per barrel. Ahead of the talks, Iran’s oil minister Bijan Namdar Zangeneh said that the country could easily increase production by 1m barrels per day within months of sanctions being lifted.
So reports the Telegraph.   $20 is quite a prospect if it were to last more than a week or two.  Of course, that's what sometimes happens with really extreme market movements, we need only recall the twin, fleeting peaks of $40 (1990 when Saddam invaded Kuwait) and $147 of more recent memory.  The precise price involved in such events never really makes any economic impact, whatever its effect on the headlines.

Can $20 be seriously countenanced?  The commodity traders' slogan runs: if in doubt, go short - because there is always more of the stuff (any stuff) out there than the conventional wisdom ever imagines: and to Hell with Malthus and the peak-oilers.  There is certainly plenty of oil in the Middle East with marginal production cost even lower still.  

But if $50 is embarrassing to Putin and many others besides, well ...  It seems longer ago than 2008 that he was mentioning $200 as the next port of call.  Isn't it interesting that Mr Zangeneh should lob this new scenario into the proceedings?  My understanding is that the Russians are quite important actors in the current goings-on.  Perhaps he knows that they know that it's just a come-on to the oil consumers around the table.  Then again, the USA is set to become an exporter ...   

Anyhow, the Iranians will no doubt chuckle at the thought of how $20 sounds on the other side of the Gulf.  What mischief.  I can't see the Saudis calling off ops in Yemen any time soon.

ND

Wednesday, 1 April 2015

So who is right?


This is one of the more interesting Newsnight discussions that I have seen recently. (Caveat: I hardly watch Newsnight these days, as its leftist premises hack me off and when there is a good discussion it ends before it gets detailed enough for my liking...)

The context of this is that, as the well-informed readers of C@W already know, the Evil Tories have planned to cut public spending back to 36% of GDP or, in other words, back to the level it was in the dark days of 1999-2000 just before Gordon Brown turned the taps on (rather unnecessarily, in retrospect) to win the 2001 election. From the gnashing of teeth, tearing of clothes and the like from almost all mainstream commentators (OK, so just the BBC and Labour party), such a proposal would appear to be a proxy for killing all first-born sons.  

From the Right, we have people quoting the Brown stat (which may be a tad unfair on Gordoom because the genius Ken Clarke admitted that he had no intention of sticking to the spending plans that he foisted on to the incoming Labour government in 1997), and, as the great N. Sarkozy once didn't say: "nobody thought in 1999 that there were too few UK public-sector workers".  

From the Left, we have people like Edouard Milibande (frère spirituel of the beleaguered President of France) worrying how on Earth the welfare state *and* the NHS can continue to function under such financial pressure, if all the police- and fire-men, nurses and five-a-day co-ordinators are not to be sacked at the same time; as well as the more thoughtful leftists such as Will Hutton wondering whether we ought not to be building state-funded infrastructure to get the economy growing more strongly in the longer-run.

So who is right?

These things are never straightforward: as Scott Sumner points out, the success of Singapore can be claimed by rightists and leftists alike: lefties love the state-led capitalism model aped in so many other fast-developing countries; righties can point out that the state absorbs a much smaller share of national wealth in Singapore than we consider normal in Europe.

What is really interesting is that they can all be right at the same time.  Free-market capitalist types like to remind us that what matters is the return on capital invested.  The state might be able to invest heavily in a high-return game and still come out ahead, even after the usual inefficiencies have been written off.  In some countries (see Scandinavia for details) the state sector is so well-run that it can afford to be much more dominant in the economy than even Red Ed and his side-kick-who-shall-not-be-named would countenance in Britain.  Some things which the state instigates would simply not happen in the absence of coercion, but does that mean the state has to actually run the schools? (I know you are all dying to discuss the NHS: a lot of Americans regard state-led healthcare systems to be a huge de facto subsidy to industry, and indeed the bearing of the costs of the NHS by consumers rather than employers was one of the key arguments in its favour in the 1940s.) Some people argue that high levels of wealth redistribution actually generates, rather than hinders, growth because it can create bigger consumer markets.

And the real kicker is that some stuff works better in the public sector at certain times, and better in the private at others.  It is arguable that the railways, for example, absorbed far more investment in Victorian times than was justified by the potential revenues, but the state then botched the de-investment in the post-war period.  Everyone said they loved the state-owned East Coast service, but was the taxpayer really to go on the hook to buy its fleet of sexy new Hitachi trains?

So what can we conclude from all of this?

The conclusion that I would draw from this is that there is no permanent correct answer which applies at all times and for all sectors.  Maybe the Post Office could have built a better fibre-network than the cable-TV companies did.  So, the answer is to try and fail, to try again, and experiment until we settle on a balance that works for a while until the dice are rolled again.  There is no point in the hard-left fantasising about a Scandi welfare model in the UK, because selfish individualistic Brits will never accept the required levels of taxation and intrusion into their lives; likewise there is little point for those on the right in getting upset because the coalition hasn't cut so hard that unemployment hit the 4 million level predicted by Labour.

Incremental change, pragmatism, and the willingness to risk the occasional failure is the way to do it.  So when a political leader claims to have a magic formula to apply if only the electorate would stop being so obtuse, then run - hard - to the centre-ground.

(The capitalists are at work, campaigning for Mr Quango's re-election.)