Friday, 28 August 2015

The Ballard of Ed & Yvette

How the decision was made for Yvette Cooper to stand as a Labour leadership candidate.

And how Ed Balls reacted. 

With the usual apologies.
This time to Victoria Wood. And her hit from the 'soon to be fashionable again' 1980s

Friday Fun - Naming Day

What name best suits for the new Labour Leader?

I really like the Jezbollah efforts that I have read, better than the bland Corbynista. Can we do better though?

After all we are about to gets years of hilarious copy on a plate with nuclear disarmament, Nato-Withdrawal and Open borders for the Open University.

The top runners for me are:

Jerry the Red

any advance on these?

Thursday, 27 August 2015

We've never had it so good

One of the recurring themes discussed on this blog by our illustrious readers (welcome one, welcome all, but don't be offended if stupid comments are taken to task!) is whether life in the UK has improved in recent decades or not.  Anecdotal evidence suggests that most people would balk at the suggestion that life was better in the 1970s, and yet that is precisely what some people suggest.  I want to explore that, and what better time to do that than on the day that it has been announced that net migration to the UK is at its highest ever level?

By complete coincidence, I have been reading Niall Ferguson's Always Right, which is a wonderfully unequivocally favourable account of Mrs T's time in office, analysed with the benefit of twenty plus years' hindsight. Ferguson even manages to get Saint Margaret off the hook for the Poll Tax and the ERM. Hmm. Mild tint of rose aside, Always Right contains some interesting stats to help us answer whether our great nation is better now than it was forty years ago.

In 1975, the inflation rate reached 27%. Today it is 1% on the old measure, and basically zero on the consumer prices index.  We can argue about whether a particular index captures the actual cost of living for a real person or family, but there is no arguing that inflation has collapsed relative to its level in the 1970s; it hit eight point something as late as 1990. Returns on stocks and bonds were negative in the 1970s.  The mines were costing £1bn a year in subsidy. No wonder people were leaving in droves for sunnier, less-traumatic climes.

Unemployment reached 4% when the Tories launched their famous election poster. It is hard to compare old stats with current stats because the way unemployment is measured has changed a lot in the intervening 40 years; unemployment is probably a little bit worse now than it was then, but not by much. Employment is at its highest ever, pretty much right now.  Nobody would deny there were tough times in the 80s and 90s, but we really are enjoying a jobs boom here.  Let's not talk even about the strikes.

A topic frequently returned-to at C@W is the price of housing.  Nobody can deny that house prices have soared compared with income.  There are many causes: rent de-control, tax reforms, the general build-up of capital in the economy; and yet owner-occupation was only 54% in 1981.  Our heroic 1970s "average earner" was emphatically not racing up the property ladder. It has never been easy to buy a house, but outside the south-east doing so is now more affordable than it has been since John Major left office.

Foreign travel has blossomed - we spend four times as much abroad as we did in 1979, we have shiny gadgets coming out of our ears, a hugely wider choice of things to do in our spare time, and live generally much healthier lives. The UK's cultural industries are booming. Even the coffee is better.

State schools are some of the best in the country.  We have the best demographics in Europe. We have Europe's economic and cultural capital.  

Nobody talks about managed decline or the "brain drain" any more. So, hopefully you are now persuaded that we've never had it so good. No wonder so many people want to make this island their home, to make a go of it, to enjoy a life that would be impossible in many, many other parts of the world. Yes, we need more housing and infrastructure, of course. Nobody would argue that we don't have any problems. But give me 2015 over pretty much any earlier year.

Next target for the newspaper's oil wrath : retailers

In the recent times the Major petrol retailers get a lot of stick, somewhat justified but not entirely, for not reducing their prices when the price of crude oil falls. As I have gone into before, the refining of the product and margins in that industry are of course more important factors. Not that journalists care.

I have been impressed of late with Journo's uncovering the scams at airports and hospitals where customers are over-charged because of the captive market created in the local environment. These are good things and show the power of a free press, albeit in a small way.

To continue this theme, we can consider what crude oil gets made into - the answer is easier if we try to think of things not derived from crude oil. For example, in a supermarket:

- All the medicines are oil based more or less,
- All packaging that is not pure paper - so, er, all of it.
- Most flavourings and dyes
- All baby products, with each nappy being one  cup of crude oil originally for example
- Then there is the heating and lighting
- Much apparel, including all trainers, are mainly oil based
- Plus the costs of transporting everything to the market.
- Even all the food is grown with oil based fertilisers.

So basically, supermarkets have had a 50% reduction in the input costs to their products in the past year months. It may take some time to feed through as many of the products are a long-time in production and transport. We should really expect to see big reductions in retail prices across the majority of goods. In fact, this alone could well be enough to push the country into deflation for the rest of this year.

However, I have a sneaking suspicion the desperate big Four supermarkets - all suffering from stiff competition, will use the falls to help them rebuild margins and profitability where possible.

Wednesday, 26 August 2015

FTSE struggling to hold 6000...

FTSE 100 (^FTSE)

"A summer blip"

That was the confident tone I head on speaking to friends and associates working in the Banks on Monday this week. The adults were away and there was low volume, allowing hedgies and their algorithms to have their fun by hitting stop losses.

No need to worry, China has a history of the Government interfering in the economy to keep everything on track.

Yet I now note the US markets were not very re-assured by the Chinese panic interest rate reduction announced yesterday. Indeed, the market fell. The FTSE in the UK today is down another 1% and struggling to hold above 6000 points. Indeed, the long terms chart looks like it is ready to make a decisive break up or down - I don't get the feeling that an 'UP' is on the cards right now.

When the Central bank cannot provide re-assurance to the markets through emergency policy then something fundamental is really wrong in the economy. China is an interesting conundrum as it is unlikely to do anything as radical as fall into outright recession. The markets there too have been juiced with retail investors who are being robbed by the professionals as is ever the case and this may make the situation appear worse than it is.

However, I am mildly worried. September is upon us and after that October. It is 7 long years since 2008. These months have a terrible history of igniting the woe in the markets and the economy.

What will happen when the adults come back next week?

Monday, 24 August 2015

Getting old ?

The air crash at Shoreham caused the first civilian deaths at an airshow in 60 years. 
And while the crash was certainly a major one, and some relatives of the dead asked for air shows to be stopped, the track record at these events is unbelievably good. Its far far more likely a person would be injured traveling too an airshow than at an airshow.

The government decided against the usual panic, media led calls for intimidate knee-jerk action. in the debates its always suggested an outright ban as the first response. When the London and Glasgow helicopter crashes occurred there were similar calls to ban all helicopters in cities. 
Instead the government decided to stop flights by the vintage planes and have a review. They are going down the health and safety, risk assessment route. And quite right too.

As we read the other week on this blog, when discussing the Tornado, military aircraft in particular have a short shelf life. They aren't supposed to be flying 50 years after they were designed. Who would they fight? Who would dare fly them in combat ?

The United States had an unusual role for some of its veteran aircraft. They were turned into airbourne firefighting planes. Dropping gallons of water-slurry onto fires. Vintage aircraft were a common sight, indeed the only sight for many years as these planes, a mix of transport and military designs, some 50 years old, were used regularly by the US Forest Service.
In 2002 a c-130 transport plane, which was built in 1957, suffered structural failure while firefighting and broke up in midair.
In another incident that year a variant of a US Liberator bomber,converted for firefighting, also broke up during operations. This plane was from 1945.
Naturally both had had airworthiness certificates. And been approved to carry out their role.
Nevertheless in 2003 several planes were told to be withdrawn from service and in 2004 the entire tanker fleet was grounded.

For the USA this was a major blow. Wildfires are commonplace. Grounding an entire fleet of 40+ aircraft left just helicopters and light tankers and some more modern, converted, military transports.
But the authorities had decided that the accident rate, general maintenance, stresses of their role, left them no choice but to ground all the old planes. And the Forest service would have to just do what it could until new aircraft became available.

Initial reports from eyewitnesses at Shoreham seem to suggest it was not mechanical failure that caused the crash. So grounding every plane over 20 years old would be foolish. instead the regulator has instructed that..

Vintage jets will not be allowed to perform "high-energy aerobatics" over land at air shows. And all Hawker Hunters,the plane that crashed, have been temporarily grounded.

This does seems  a very sensible precaution.

A B-26 invader from the Steven Spielberg movie ALWAYS. A film about dare devil aerial firefighters. 
The film was released in 1989 {and a bit of a flop - even though its a great romantic film}.
The B-26 was a WW2 bomber. An early one too. Coming into service in 1941.

Back form hols...all a bit worrying... all very 2008 too?

Baltic Dry Rates - Asia to Europe:

FTSE 100:

Chart forFTSE 100 (^FTSE)

Brent Oil Price:


At least I can think of a few good things:

- No interest rate rises for my mortgage!
- Xmas toys will be cheap
- Filling up my car for under £1 per litre very soon

Apart from that, oh dear.

Sunday, 23 August 2015

Marjorie Dawes economics

Jeremy Corbyn continues to get plenty of attention, and hard left media commentators (hello Owen) are now pointing to the fact that some economists (including one who predicted that the government's austerity plan would result in unemployment of 5 million) have broadly welcomed Corbynomics.  Let's examine one of his suggestions, which is "QE for the people". QE for "the people" sits in opposition to QE "for the bankers", and bankers are evil profit-makers whereas people are nice.  [Bankers presumably are not people; maybe they are lizards. Who can be sure?]

David Smith takes the "for the bankers" bit apart in his Sunday column (also available to Times subscribers).  He points out that original QE was not designed to bail out the banks, but to lower long-term interest rates to encourage investment in things other than government bonds.  Also noted is that QE money is not "free" because it is borrowed from the central bank's reserves.  It is cheap, for sure, but not "free".  It is also not risk-free, and ultimately the taxpayer stands behind the Bank.

People's QE is the same cheap money but this time ploughed into bonds issued by a state investment bank, whose goal is to direct investment into things which the private sector and existing government spending are allegedly incapable of producing themselves: public transport, social housing, green energy.  On the face of it it seems seductive: if you asked people whether the country would benefit from improved public transport/social housing/green energy you would probably get a resounding "yes!".

Of course, people also say yes to motherhood and apple pie, yet neither comes for free.

Proponents of PQE say that the idea stems from "Modern Monetary Theory".  MMT says that a sovereign government need never default in its own currency.  This is obviously true: a government which can print its own money will never run out.  MMT then says that because of this fact, the nominal size of the government's deficit is irrelevant: all that is needed are balancing taxes to ensure that inflation does not run away, and to ensure that investment and spending are directed to the "right" things.  

What the government does if it wants to keep inflation in check is to raise taxes or cut government spending, for a given monetary policy.  If the government wants loose money, it runs a tighter fiscal policy (hello George); if the government wants to splurge on spending, it must keep the money supply in closer check (hello Gordon).  Does this sound familiar? It should, because effectively it is what the UK government and others have been doing since sloppy Keynesianism went out of fashion and Friedmanism came in, in the late 70s/early 80s. Since the Bank of England was made independent in 1997, the UK government can choose to tighten money by running a looser fiscal policy or the other way around, and the Bank will react accordingly to meet its inflation target.

If we run a quick thought experiment around PQE what might happen?  The Bank is instructed to print a few tens of billion quid to put into this magic investment bank, and as the money starts to be "invested" in new railways or broadband links or housing, the economy starts to pick up.  Inflation prospects start to pick up at the same time, so the government now has the choice of whether to keep inflation in check by tightening fiscal policy or to let it rip.  I can't say I've seen the Corbyn manifesto's section on inflation, but if inflation is going to stay on target then he's going to have to raise taxes or cut government spending.  He's hardly likely to cut spending on one state project as a result of new spending by the "investment bank", so it looks like taxes are going up.

When we look at what the PQE crowd are actually suggesting, it looks as though it is a quite straightforward expansion of the state within the economy.  PQE is just trying to pull the wool over voters' eyes, because even the hard left know that the electorate won't vote for significantly higher taxes.  As Ed Balls of all people once said: people think they pay quite enough taxes already.  

The coalition and Conservative governments took and continue to take a view that the state needs to shrink as a proportion of the economy, so fiscal policy is tightening so that money can stay looser, longer, so the private sector can expand.  Corbyn is proposing the exact opposite. 

There is space for legitimate debate over what the state can do better than the private sector, over what the right level of taxes and spending are overall, over the level of inflation, and so on. The fact that the Corbyn camp are basically trying to hide their desire for a much bigger state behind a complex-sounding magic money policy may tell us how confident they are that the electorate will vote for their Courageous State.

Friday, 21 August 2015

Miliband's legacy

This is the system that was set up by Ed Miliband.  He may well have directly kept Labour out of government for ten more years, by opening up the leadership process without having thought it through.  You won't catch me crying over the decline of the Labour party, but I can't help wondering how bad it might have been if this fool had been let anywhere near the great offices of state.  He never did seem to take on board (at least in public) the irony of his campaign against the energy market which he presided over in office, so one can only wonder what a wreck he might have made of foreign policy or the criminal law.

Thursday, 20 August 2015

The Great British Bank Off

Britain’s banks and finance firms performed surprisingly well in the credit crunch and its aftermath because the industry is enormous, with good links to countries all around the world, according to analysis from leading academics. 
Despite the conventional view that the City of London and its banks became too big and too complex, the paper, written by Professor Dariusz Wójcik at the University of Oxford and Dr Daniel Haberley at the University of Sussex, argues that the size and scope of the UK finance sector made it more resilient than smaller rivals.
“Our results suggest that this surprising resilience may stem from the uniquely diversified global connections of the City, which has been able to pivot, in the wake of the crisis, away from Europe towards more robust American and Asian sources of funding.”
By contrast, countries which had large finance sectors as a proportion of their GDP but which were not diversified – such as Ireland, Cyprus and Iceland – have suffered more.
Strength through diversity, etc.

Another good performer was Singapore.  In fact, we could learn a lot from Singapore: a nation which trades on being the most sensible country in its region; a rule-of-law regime with strong property rights and lean public services.

Singapore also did well because it runs a government surplus when the going is good, so it had plenty of hard currency in reserve when the brown stuff hit the spinny thing.  I hear the food is excellent, too.

Tuesday, 18 August 2015

Paddy Power pays out on Corbyn

Noel Gallagher ?

Bookmaker Paddy Power have paid out on Jeremy Corbyn being elected leader of the Labour party. 
This is a surprise. the ballots have barely even gone out. There are still weeks to go.

Yet the betting company decided that there wasn't any point waiting as Corbyn was so far ahead; on every opinion poll and every popularity indicator, the unions backing, that it was a forgone conclusion he would romp home.They have their own data too. The actual sums being waged. Which are mostly going on Corbyn.
And of course, by paying out on Corbyn, they make his victory even more of a certainty.
So justifying their decision to pay out early. 

 Describing the MP for Islington North’s success in the campaign as the “biggest upset in political betting history”, Paddy Power is so certain that Corbyn will win that it is paying out £100,000, even though polling closes on 10 September.

So. it really does look like its happening. Syriza is coming to Britain. The false dawn of the Mili-Brand Youtube will be buried under the arrival of the real deal. 

What the exact effect of this will be, we can never be sure. Likely it will mean disaster for labour. But that is not certain. It won't take much of a downturn to kick of the austerity marchers again. If teenage Israelis are kidnapped and killed again, who knows how that nation will react? Another 'invasion' of Hamas? 
Tory sleeze hasn't had much of an outing since 2010. We are long overdue a major scandal. 
The EU referendum will put severe strain on Cameron and his whips. Even harder for him with a lukewarm Labour leader instead of one who would not even consider allowing a referendum. Corbyn might fancy giving the Scots an alternative to the SNP's fanatically pro EU support. 

If Jeremy Corbyn really is Labour leader it might not be quite the dream that Tory strategists believe. 
Labour infighting is certain. but it will add unpredictability to current areas of certainty.

But we can know for sure is that if Corbyn is leader, its all over for the Greens. Why vote for a veggie nut cutlet, folk festival cafe form of socialism when you can have the real raw  red meat, dripping with blood,  hard left socialism of the streets?

Monday, 17 August 2015

Supply 'n demand, innit.

The number of people living with diabetes has soared by nearly 60% in the past decade, Diabetes UK warns.
The charity said more than 3.3 million people have some form of the condition, up from 2.1 million in 2005. 
Dr Joan St John, a GP in Brent in north-west London, where diabetes levels are some of the highest in the country, said the condition had become incredibly widespread. 
Part of GP pay is linked to diagnosing and treating diabetes - and has been for years.
 Would any NHS experts like to tell us how many years?? Capitalists may like to take a guess.

Saturday, 15 August 2015

What is Blairism?

We've had plenty of vibrant discussion here recently about what it was that Tony Blair stood for, whether David Cameron is a Blairite, and what it means to be an anti-Blairite when all of the likely next Labour leaders are firmly to the left of the party.
We will make education our number one priority
The Labour government introduced "Academy" schools, outside local authority control, and infused with private cash and management skills.  This continued the process of "opting out" introduced under the previous Conservative government.  The Coalition introduced "Free" schools, outside local authority control, and paid for on a bums-on-seats basis.  The government puts up some capital to get the school up and running.  The Coalition proposed to convert all local authority schools to Academies or Free schools, but this was dropped when someone pointed out that not every school would be in a position to run itself.  The present Conservative government is putting up resources to support any school to become an Academy if it wants to; so any school that wishes to "opt out" in the old parlance ought to be able to.

Blairism in education is to release education from rigid structures; allow new schools to be set up and allow bad schools to fail.  Parents ought to be able to choose schools for their kids, introducing a competition element into the sector.  Standards ought to rise.
Higher education 
The improvement and expansion needed cannot be funded out of general taxation. Our proposals for funding have been made to the Dearing Committee, in line with successful policies abroad. 
The costs of student maintenance should be repaid by graduates on an income-related basis, from the career success to which higher education has contributed. The current system is badly administered and payback periods are too short. We will provide efficient administration, with fairness ensured by longer payback periods where required.
This is the process which started with the introduction of loans and fees, largely completed by the Coalition.  Students borrow from the state to pay for their higher education.  If they do well in their careers they pay back the money over several years; if they don't do so well, eventually the debt gets written off.
Economic stability to promote investment
Tough inflation target, mortgage rates as low as possible
Stick for two years within existing spending limit
Five-year pledge: no increase in income tax rates
We will introduce a Budget within two months after the election to begin the task of equipping the British economy and reforming the welfare state to get young people and the long-term unemployed back to work.
Speaks for itself.  Sensible sound economics: stability, keep taxes down, get people off welfare into work.
A reformed and tougher competition law 
Competitiveness abroad must begin with competition at home. Effective competition can bring value and quality to consumers. As an early priority we will reform Britain's competition law. We will adopt a tough 'prohibitive' approach to deter anti-competitive practices and abuses of market power. 
In the utility industries we will promote competition wherever possible. Where competition is not an effective discipline, for example in the water industry which has a poor environmental record and has in most cases been a tax-free zone, we will pursue tough, efficient regulation in the interests of customers, and, in the case of water, in the interests of the environment as well. We recognise the need for open and predictable regulation which is fair both to consumers and to shareholders and at the same time provides incentives for managers to innovate and improve efficiency.
Free markets where possible, sensible regulation where not.  0.7% of GDP on international aid.

The key to "Blairism" to me seems clear: to have a relatively sensible set of policies which nobody can really argue against.  Who isn't in favour of education??  Who doesn't think the water companies are a bit cheeky?  Who could argue in 1997 or 2010 that the university funding system worked nicely for students and the taxpayer?  So you set your stall where it is difficult to attack.  By doing so you make it very hard for the opposition to score many points.  The Tories in 1997 onwards had no idea whether to attack Blair from the Left or the Right.  If they went Right, they were accused of being nasty; to the Left lies incoherence and general oblivion.  Only when Blairism went off the rails and the truth of Brown's economic incompetence became more widely known could Labour be knocked off course.  Both Coalition parties stood on Blairite platforms, and won.  Ed Miliband was reduced to attacking Blairism with idiotic half-baked ideas such as "Predistribution" and populist anti-finance and anti-electricity rhetoric.  

Cameron's team seem to have understood this throughout the last parliament.  When they came up against a genuine backlash, such as over health reforms, they backed down.  Live on, fight another day.  Bring forward similar proposals a bit later.  Win the election, send your enemies mad, then move the debate slightly in the direction you want it to move.  Win the next battle, move on.  Keep winning the war, because if you don't then someone else will capture the flag and move into Number 10.

There is very little in Blair's 1997 manifesto which moderate Conservatives then or now could be upset about. Obviously, those who want public spending to crash to 15% of GDP, or want a return to Fortress Britain (no red salmon here, folks), will never be satisfied.  More importantly, nor will those who want to reopen coal mines and to return to damp cheese and pickle sandwiches on the railways.

Friday, 14 August 2015

China Continues to Puzzle and Amaze

President Xi, it is said, has placed political control above - well, above all else.  Which makes the access granted to the world's media for reporting on the ghastly Tianjin explosions all the more remarkable.  And that's notwithstanding this rider from the Beeb:
Authorities in China have over the past 24 hours silenced social media users who have criticised the coverage of the Tianjin explosions. Posts condemning "disgraceful" local TV coverage of the two blasts on 12 August have been removed from Sina Weibo, China's Twitter-like micro-blogging platform, as have posts suggesting that local authorities restricted international media reporting on the incident.
(Pretty odd from an organisation which - commendably, but obviously without much let or hindrance - managed to cover the event comprehensively.)

I go back to my puzzlement over the MH370 affair.  In a country and system where 'face' is so important, why were the distraught Chinese relatives allowed to emote in public, in such a raw fashion?  It would never happen in, say, Japan etc etc - we discussed it all back then.

There are aspects of China I just can't read.  Having thought the '08 Olympics would let the cat irreversably out of the bag (wrong), I find myself wondering again: is Xi really in control?   Is he so much in control, he doesn't mind (from a position of strength) western media blanket-covering his industrial disasters?  Does he just think he is in control to that extent?   ...


At least Corbyn will sort out immigration

Indeed, as in the early 1970s, Britain may enjoy rapid net emigration under Comrade Jezza...

Thursday, 13 August 2015

Can Blair ever match Thatcher....for being hated by the Left?

Tony Blair is trying, without much chance of success, to stop Jeremy Corbyn being elected as leader of the Labour party.

(I never did get round to registering to vote as it happens...)

In an article in the Gaurdian, he makes a plea for sanity to a whipped up tribe of lefties. His article is very 'meh', of note is that he even feels he has to start it with 'even if you hate me....'

But the comments, wow they are amazing. The level of vitriol is outstanding. Blair had a checkered time as PM but his worst legacy was to let Brown have the keys when he left.

The Left now hate him, indeed, it had me wondering. Can he achieve the impossible and be hated as much as 'Fatcher' with every evil in the world his fault. I would never have believed that anyone else could be lifted to that level. Perhaps like Iran, where the US is the Great Satan and others can only attain 'Little Satan' status.

An  strange turn of events though. I am glad I am not a lefty, all that confected hate and angst must be very trying to live with.

Wednesday, 12 August 2015

China Knocks Greece Firmly Off the Front Pages

The whole Greece thing became an exceptionally dominant story for a while back there, didn't it? Maybe it should be again, what with headlines like:
Greek stock market surges as outline bailout deal reached with creditors 
€86bn, eh? But somehow that looks small beer alongside 
China stuns financial markets by devaluing yuan for second day running
That's quite a blockbuster for the silly season.  As the price of oil gently subsides back into the 40s and Vladimir Putin mints ever more of the hard metallic currency he reckons the world understands best, Obama's final 18 months in office may be more demanding than he once expected.


Tuesday, 11 August 2015

The Euro tragi-comedy, Part 93

The Greek debt crisis has saved the German government some €100bn (£70bn; $109bn) in lower borrowing costs because investors have sought safety in German bonds, a study has found... 
The IWH study says every time this year there was a spike in the Greek debt crisis, which made Greece's exit from the euro appear more likely, German government bond yields fell. Whenever the news looked better, Germany's bond yields increased.
If you had your cynical hat on, you might wonder if the German government was playing a game of "heads I win, tails you lose"... 

There are lessons for the UK here: it is an awful lot easier to pay for your public borrowing if you don't let it run out of control.  Presumably the socialist dreamteam of Corbyn/Murphy would tell it otherwise.

Monday, 10 August 2015

Oil collapse - a gift to the West.

There are some rulesabout the oil market which are being tested to production. One if the economics of sunk costs. It is very expensive to get an oil filed discovered, permitted, drilled and flowing. Literally billions of dollars for the larger fields.

Once this money is spent, then it is gone. Once the oil is flowing it is well under $10 a barrel. So if you have spend the money opening a field, it flows forever. Only accountants look at the overall economics. Countries do not budget like this, they work on a current account only formulae, once money is spent it is gone, worry about income for next year, not last year.

So once a large Petro-state has switched on the oil taps they never ever get turned off. The most an OPEC cartel decision can do really is limit the future expenditure on increasing production and hope that current fields run out.

Of course, with Shale in the USA it matters more whether the companies make money, but not so much more, such is the complexity of debt interest and leverage that overlays the industry. Plus the cost of drilling shale have already been absorbed, you may as well pump it.

Thus, despite a moderation in demand and a huge over-supply of crude oil, the world's petro states keep pumping. They need the money, even Saudi Arabia is likeley to have a 20% budget deficit this year. The oil will flow more and more and the price will keep dropping.

Today the price of crude is back under $50, as noted here before this is bad for the Middle East, Russia, Venezuela and Nigeria (and Scotland...). It is good for USA, Europe, China and India.

With Oil below $50 the inflationary pressures in the West are very benign, allowing the recovery from the Financial Crisis to continue. Russia will have a harder time justifying invading Ukraine and there will be less money to be funnelled to ISIS from its, err, 'enemies.'

Harder today to see is the dynamic really changing, demand in China is increasing more slowly and the West keeps investing crazily in renewables just when conventional prices are weakening. Plus the revolution that is LNG is still yet to come to much of the world and LNG prices make oil look like the liquid diamonds.

A new era of low oil prices thanks to ever increasing technologival innovation and desperation on the part of petro states - justhow the West wanted it.

Saturday, 8 August 2015

The Great Stagnation

Commenter Lord T notes on another thread that
We have made no advances in 20 years, unless you count making things smaller. Mobile phones, computers, our wages...
Now, being the naïve lefty metrolib arts grad that I am, I assumed that this statement was absurd.  Of course the human race has made advances in the last twenty years or so, I thought to myself.  After all, I considered, I keep having to replace my phone because each new model does something whizz-bang, and I have to keep up with the Joneses.  But challenged by Mr Quango to do a blogpost proving Lord T wrong, I am wondering whether I am perhaps hopelessly naïve indeed.

Let's take the mobile phone point.  Twenty years ago you could get this:

It's called a Motorola Flare.  It does everything a mobile phone needs to do: it can make phone calls from pretty well anywhere that Mercury One2One provides a signal.  The latest iPhones (other phones are available) can take photos, record and edit videos, interact with friends and strangers in 192 countries, and let you check your bank balance, but really that is not so much an advance as putting several different devices into one box.  Not clever.  In fact, modern phones have useless batteries, so the Flare is probably better overall.  The Flare worked on exactly the same GSM networks which we still use today, and in 1995 One2One's coverage was comprehensive (as long as you didn't want to venture outside the M25).  Carrying around hyper-connected supercomputers in our pockets is just absurd consumerism; we were good enough at mental arithmetic to divide up the restaurant bill in our heads.

If you did need a camera in 1995, you could buy one of these, which I am sure you will agree is perfectly adequate:

This camera has memory storage for 36 photos, who needs any more than that?  I bet you could even have bought a selfie-stick if you needed one.  In 1995 there wasn't a button to upload your photos to Facebook, but can we really call Facebook an advance??  In 1995 we used to actually visit our friends and family, to interact with them in real life, rather than send them photos of what we are eating for supper.  To get there we might have used the UK's top selling motor of the era.

Cars are another field in which absolutely no advances have been made at all.  This little beauty has four wheels, a petrol engine (no doubt running on unleaded), and the 1.4L model could get up to 105 mph.  It could do 34 miles to the gallon.  I learned to drive in something very similar, and I could not fault the handling.  The current entry-level Focus has a 1.0 litre engine (which is obviously much worse than the 1.4 which the Escort had in 1995) and the fuel economy is only about 50% more with only a tiny increase in power.  Modern cars have seatbelts, as cars did twenty years ago.  There have been no developments to speak of in car-safety, and our roads are more accident-prone year-on-year.  So again, in the car field, no advances at all.

If instead you decided to stay in, TVs were just as good twenty years ago as they are today.

If you were a high-roller you would probably have Sony's latest Trinitron 32" screen.  Maybe you wouldn't even have needed to be a 1%er: they only cost about £2500.  In 1995, everyone had Sky or cable, so you would have been able to choose from nearly 30 channels, or you could rent a video from Blockbuster.  TV highlights debuting in 1995 were Dangerfield, Hollyoaks, and The Thin Blue Line.  No TV of any note has emerged since 1995, as we all know.  Indeed even the most leftymulticultysoftleftpinko has to admit that cultural output in Britain and the wider world has pretty much collapsed in the last twenty years.  Nobody has produced any music, film, or literature of note in the last twenty years, so we are forced to keep re-reading High Fidelity while listening to the Spice Girls.  HD is just for wendyball.  Hilary Mantel, Zadie Smith, pah.

Architecture and building engineering has been treading water; the art world has never recovered from Damien Hirst pickling a shark.

OK, OK so all of this is fluffy consumer crap that nobody needs.  What about the important stuff?

According to the UN, extreme poverty has declined significantly over the last two decades. In 1990, nearly half of the population in the developing world lived on less than $1.25 a day; that proportion dropped to 14 per cent in 2015.  Globally, the number of people living in extreme poverty has declined by more than half, falling from 1.9 billion in 1990 to 836 million in 2015. Most progress has occurred since 2000. The number of people in the working middle class—living on more than $4 a day—has almost tripled between 1991 and 2015. This group now makes up half the workforce in the developing regions, up from just 18 per cent in 1991.  The proportion of undernourished people in the developing regions has fallen by almost half since 1990, from 23.3 per cent in 1990–1992 to 12.9 per cent in 2014–2016.

So that's that pretty much answered: we're all poorer and hungrier than we were twenty years ago.  I would try and find some UK income or GDP numbers, but we all know they are made up, so what's the point?

In the good old days, we were promised glamorous Jetsons-style living, flying cars, nuclear aeroplanes, and holidays on Mars.  None of that has happened.  In the last twenty years, we have made no progress at all in space exploration.  We have absolutely not sent exploratory robots to Mars, comets, or taken high-resolution photos of Pluto.  Definitely not.  On the topic of aeroplanes, no new commercial aeroplane models have been introduced since the 777 in 1994.  Jet engine economy has not soared, long-haul travel has not become ever cheaper and more accessible.  The UK aviation industry has basically closed down, and everyone holidays in Skegness because we are all in such poverty. Olé.

No new drugs have been developed.  UK life expectancy has not risen by five years in the last twenty.  Everyone pretty much dies of cancer or AIDS when they hit 40.  And you aren't even allowed to smoke in pubs.

So I think Lord T has it pretty much spot on, and I have to admit defeat.  Luckily, nobody will ever know, because blogs haven't been invented, and you don't have an internet connection at home.

Friday, 7 August 2015

Weekend Review: Ravilious Exhibition

Dunno how many of you are London-based (we make no capital-centric assumptions here, oh no!) but if you are, or are able to get to the wonderful Dulwich Picture Gallery before 31st, then I strongly recommend "the first major exhibition to survey watercolours by celebrated British artist Eric Ravilious".

Ravilious was bimbling along as a fine graphic artist of modest repute when at the start of WW2 he was appointed a War Artist.  Of no obvious martial inclination, he nevertheless accepted this challenge with gusto - in his own oblique way - and hurled himself into  headquarters, dockyards, and fully operational destroyers, submarines, convoys, aircraft ... ultimately to his untimely death on active service off Iceland in 1942.

'RNAS Sick Bay, Dundee' (detail)
His style sometimes breaks out into classic inter-war 'travel poster' mode, but is mainly characterised by an extremely tight, craftsmanlike watercolour discipline, with very pronounced and strongly-executed approaches to rendering large blocks of surface, be they acres of glittering ocean, miles of threatening skies, or simple square yards of soft furnishings.   I have to believe the Hockney of the last two decades has been strongly influenced by Ravilious.

'No.1 Map Corridor' (detail)
I've picked wartime stuff here but it's of tremendously varied and sometimes quirky subject matter - go google images for lots more (and some of the best, I can't find online).  Boldly confident, crisply executed, though almost always of the lightest touch, and almost all of it excellent.


Tornado and Other Amazing Old Aircraft

Image result for raf tornado aircraft
Pic:  MoD
The Tornado, we learn, is to have its ISIL-bombing role extended to 2017, some 37 years since the type entered service.  Some of us recall when the Tornado was the MRCA (multi-role combat aircraft), successor to the AFVG (Anglo-French variable geometry), successor to the F-111 in the RAF's plans, successor to the much-lamented TSR-2 ...  and the wags said it stood for must refurbish Canberras again.

Yes, the Canberra, first flight 1949, last served operationally with the RAF in 2006.  That's fifty seven years.

Track back 57 years before 1949, and we are more than a decade before the Wright Brothers did their epic thing.  From their efforts in 1903 it took a mere 43 years for the speed of sound to be broken in level flight.  By the end of the 1950s both Concorde and the forerunner of the SR-71 were on the drawing board.  No pre 1930s aircraft had any serious life beyond the early 1940s (unless you count the Tiger Moth - 1931 - which had '20s antecedents): the main pre-war candidate would be the DC-3, the origins of which were in the DC-1, also 1931.

In short, development in aviation seems to have gone exponential for half a century, then plateaued out dramatically.

Perhaps more to the point, (a) aerodynamics got as far as it needed to in 50-60 years, and (b) it turns out not to be terribly useful to fly at Mach 2.  By contrast, avionics has been where the big advances have come from since the '50s, along with metallurgy; and probably still has a way to go.

So forty-year-old-plus platforms can remain fairly viable, with periodic avionics upgrades.  Airframe metallurgy is the limiting factor.  The B52 is likely to be the all-time champion. Wiki says it will soldier on into its 90s:  I have heard it said they'll probably make their century.  Never raced or rallied, as they say - just thundering on over the horizon, straight and level, not too much stress on the old wing spars. 

What, then of the Tornado?  I quite like the machine, having worked with the RAFG fleet while still a soldier:  the Jaguar was a bit flighty, the Harrier a bit flaky, the Canberra a bit staid.   (I never experienced the Buccaneer; and to my eye it was the F-4 that was the really handsome ship.)  Its latest recce capability is very fine indeed, and Typhoon cannot (yet) compete.

Tornado wasn't quite destined to match Canberra for longevity. Well, it certainly has been raced and rallied! - and honourably so (from the Air Force perspective, that is; we'll ask Chilcot for the broader view): seen a heap more action than anyone on an early conversion course in, say, 1980 would ever have imagined.  Prior to the recent announcement, the plan had been to operate the fleet - currently rather less than 100 strong - in fast-diminishing numbers, cannibalising as spares run out, until they were down to one smallish squadron at the end of this decade or more likely before.  

To run operationally through 2017 actually requires three squadrons, which probably means (does Osborne but realise it) that new spare parts will need to be made.   BAe can perhaps respond - on a cost-plus basis, naturally - or perhaps we buy from the Saudis?  Gp Capt S.Weetabix of this parish will doubtless have a view.  Soldier on!


Thursday, 6 August 2015

The Real Significance of LIBOR

A sound but incomplete point was made by Graeme, a commenter under our post on the exemplary sentencing of the LIBOR-rigger Tom Hayes earlier in the week
Some people are convinced that it worked to the detriment of some class of society…how can you possibly prove that?  A joke sentence. I accept that it would be good to jail a banker or 2…but please let us not fabricate justice in this stupid way.
True enough, it would be difficult, and more likely outright impossible, to establish direct net damages for the average person 'exposed' to LIBOR (as the media tell us we all are), arising from the riggers' games.  That's because they were rigging to benefit their own specific book.  Someone on the other side of that position would lose directly, of course - and others with the same specific exposure: but still others would by the same token be fortuitous beneficiaries.  So - unlike (say) an oil producers' cartel rigging prices (upwards!) - the puzzle of net direct damages is intractable.  It would, as Graeme rightly says, be ridiculous to assert that some category of our fellow citizens lost out systematically in terms of proximate losses.

But that's surely not the real point.  It's the undermining of LIBOR itself as a credible index, of the price-discovery process, and ultimately of the City and UK finance as a whole.  We know just who the systematic losers are in that awful business.  It's all of us: because the forces hostile to these vital interests of ours are many and varied, and just waiting for us to trip.  I wrote here ages ago when this was first breaking: 
The integrity of the City's mysterious processes needs to be as secure as the hallmarks on our silver and gold - always accepted as totally trustworthy the world over, just as French hallmarks are taken with a pinch of salt ... the imperative of defending these freedoms and ways of doing business should rank alongside the physical defence of the realm.
"Too late!" do I hear you reply?   Gotta start the fightback somewhere.  When I were a lad ... coin-clipping and other forms of debasing the currency used to be high treason, with the usual grim penalties associated.  They knew the seriousness of these things back then.


Service Suspended

in memory of Australian Cricket:


Milliband losing..
Cable, Clegg, Balls..
Corbyn to be elected...

What a Summer!

Simple solutions to complex problems: Part II - Melting polar ice caps

There was some resistance when I attempted to persuade readers to embrace non-EU immigration and solve the current African migrant crisis. I realise that solving long term population shifts was probably a tad ambitious. 
So this week, in the Quango Lectures, I shall attempt to try and solve something far simpler.

Global Warming.

On this global warming site - www.underground {not affiliated to the tube drivers union} there is deep concern over the melting of the polar ice caps.

Impacts of Disappearing Sea Ice
Arctic sea ice is an important component of the global climate system. The polar ice caps help to regulate global temperature by reflecting sunlight back into space. White snow and ice at the poles reflects sunlight, but dark ocean absorbs it. Replacing bright sea ice with dark ocean is a recipe for more and faster global warming.

The Problem 
- Melting ice in the arctic reduces the white reflective area that returns sunlight to space.
 About 4.5 million kilometers is the area that is reported to have been lost between max and min ice shelf extent.

The Requirements
- There are some 100 million homes in Northern Europe and the Northern USA. The average house size in the US is 200 sqm. Canada 180sqm and UK 75 sqm. The UK has the smallest house sizes in EU so that gives us a good median EU/North American Home size of around 150sqm/home.
That gives us around 15000 sq km of roof area. Much more than we really need.

The Solution
- Introduce legislation to have all roof area in Northern Europe/North America painted white.
This permanent white will reflect the sunlight lost in the arctic and Greenland regions from melting ice and so prevent accelerated global warming caused by ice loss. It may even prevent the ice loss in the first place.

* The cost of initially painting or white covering all the roofs can be met by a temporary reduction in local domestic and business taxation. Council tax payment in the UK, for example, could be offset by by having the work completed. Or governments could use some of the money earmarked for Green energy subsidy instead. Either way the 100 million roofing works will generate significant VAT and sales tax receipts and a completion date of 2030 would ensure
Industry and employment will benefit from the initial works that need to be carried out. And the the design, manufacture and continuing research of reflective white, self-cleaning, slate and tiling for use in construction.

Wednesday, 5 August 2015

Will the Boundary Changes Happen?

As one who strongly believes in devoting attention to issues in proportion to their importance, when it comes to UK politics I have long followed the Boundary Changes issue with keen interest.  Readers may recall I excoriated Osborne for failing to see the LibDems were guaranteed to renege during the last parliament, and I have tended to assume he won't screw up again.  After two or more decades (sic) of professional, determined - and strategically inevitable - Labour prevarication, this is the Once In A Lifetime Opportunity to get it right.  Right?

So when I mentioned my relative confidence on this matter in comments to a recent BQ post it was interesting to have King Kong's Banana replying:
Now that is interesting.  As it happens I don't agree with Mr Banana per se, but it triggers another line of thought.

The reason I don't go with the above logic is that (a) the whips always offer to see any likely losers right - provided they behave, of course; and (b) there is no particular reason (bar the silly manifesto promise*) to stick with a reduced number of seats - it's only the boundaries that matter**.

However, the prospect of a single-digit majority after a couple of Events does make the whole thing rather tasty.  Because every other party (barring the DUP?) has an interest in opposing boundary changes, thus giving the bastards an acute pressure-point.

Would they use a close vote on boundary changes to try to exact something on Europe?  Or is a vote needed at all (see notes below)?  What's the word in the '22, Mr Q?  


* runs as follows:   We will implement the boundary reforms that Parliament has already approved and make them apply automatically once the Boundary Commission reports in 2018 .  2018, eh?  Three years of squeaky-bums all round.
**  the reason the Tories carried through with the reduction in total numbers of seats in the last parliament, but not the boundary changes per se, was (I am told) that (a) the minority parties - all of them, LibDems included - would have prevented changes in Scotland, Wales & N.I but voted through the seat-reductions in England only, hah hah.  So the changes were never put to the vote.  But (b) the LibDems had signed up for the reduction in total number of seats and were prepared to stick with that.  Tory strategists (pah!) felt that if the reductions went through (as they did) the Boundary Commissioners would be bound to make at least some rectification of the distribution of voters when implementing the new, reduced number of seats: a distinct second-best, and only of putative assistance in 2020.

Tuesday, 4 August 2015

RBS share sale; too little, too late

The Government decision to sell-off RBS shows how poorly Governments play the markets and how well they do politics.

RBS shares have been more or less the same for 3 years or more, see below:

They only came close in early 2010 right in the aftermath of the crash when the stock markets bounced prior to the Euro Crisis of 2010/11.

The awesome power of hindsight tells us that then was the time to get shot of RBS for the taxpayer. ADIA had approached the Government about buying at a modest discount the majority of the Bank. The politics was bad, with the Government wary of allowing the Bank to fall to the Gulf ownership.

Plus of course the Coalition was looking forward to the shares recovering like Lloyds and a profit being made (note on my calcs, the total profit to be made on Lloyds privatisation is less than the loss incurred today on 5% sale of RBS). As usual, Vince Cable put the kibosh on any sale and was totally wrong.

Once that window was missed, then anytime from Jan 2013 would have been fine to sell the Bank, the market worth has fluctuated around a mean of the price it is now. But it did not suit the Government to sell the Bank 'at a loss' before the election.

Now it is safe to do so....for a lower price and for the cost of the debt interest incurred on Gilts issued to buy the bank in the first place.

RBS is a fraction of what it was as Iain Martin explains well here, so the money is not coming back.

The sadder part is that this has been the case for years and years and the time would have been better spent selling the Bank off and keeping the losses lower. Now we will be another 2 years or more paying interest in Gilts to keep the Bank on state books.

The idea that RBS will suddenly be worth £5.50p per share or more is for the birds.

Monday, 3 August 2015

Stop Press: 14 Years for LIBOR Rigging

Now this is sensational:  14 years for LBOR-rigger Tom Hayes.  Around these parts we have long advocated punitive measures against convicted banksters and this is the kind of sentence that nice middle class people can't confortably contemplate.  If it can happen to Hayes in the City - and Jeff Skilling at Enron - surely there are wider applications.

The remaining issue is: when do the senior managers find themselves coming to this salutary and bracing pass?  And what's the statute of limitations in such matters?


More interesting data for those wondering why Calais is such an issue, for now and the next 30 years...

A picture tells a thousand words so I am told, so here is my three thousand work essay on immigration:

The nub of it is to me, that the there is first map shows net GNI per capita today. As can be seen, sub Saharan Africa is a disaster, with no average wealth. With so little wealth, it is hard to accumulate any more as there is little to go around and little investment relative to the population.
No wonder the poor people there are fleeing to the UK, Afghanistan and Pakistan are not far behind.
Then we see that the projected growth of the world is all concentrated in African and South Asia. So not only are people poor but the affected Countries may well be doubling their populations in the next 15 years
Finally the sheer numbers from the UK. Sub Saharan Africa was until very recently a low population area considering its size - especially relative to Europe. But now we have reached the point of inexorable growth, with a billion young people due to grow up in the next 15 to 20 years.
They have nothing to live for where they are, so they will leave for a better future. The best place to go is to Europe, in terms of geography and economic chances.
So come they will. My own view is not wildly popular yet, but my feeling is this challenge is akin to that of the end of the Roman Empire and the dark ages. Massive population movements could overwhelm a more advanced civilisation through sheer weight of numbers. The Visigoths and other after all sort to be Roman, but could not be - it was rarely their intention to destroy what they found.
In today's world perhaps there is the technology to prevent this, but it would go against all of our current values to be so callous with a wave of humanity approaching unarmed.
Instructive too is the map below of the current wars - indeed how may of these are really driven by population issues such access to food, water and jobs. You could even make a case that the rise of religious fundamentalism is linked to the increasing poverty of the Countries affected due to massive population growth:

And finally, a last graph for the Bishop's and do-gooders who say we must help where we can. The people coming to us in the future have very different behaviours to us - the world map by homicides shows us how much value a human life has in different cultures:


Saturday, 1 August 2015

Does the Lizard Theory have some merit?

The Telegraph helpfully recalls the Mumsnet biscuit choices of politicians from the last several years.  Proof, indeed, that some of our leaders are not actually descendants of species which evolved on this green Earth.

Andy Burnham: "I don't have a sweet tooth and don't eat biscuits. But give me a beer and chips and gravy any day?"  

Jezza Corbyn: Didn't answer.

Gordon Brown: Didn't answer, several times.  His spinners let it be known 24 hours later that he likes anything with a bit of chocolate.

Nige: Didn't answer.

Liz Kendall: "I'm more into savoury snacks. Currently popcorn."

Who the hell are these people?  Look, I realise that some people try to eat healthily.  No doubt spinners everywhere try to hook the constant-dieter vote.  Clearly what Alex Salmond intended when he responded with "I’m on the 5:2 diet, but Jim Walker’s plain chocolate ginger shortbread".

But to not know instantly what your favourite bloomin' biscuit is?

I read somewhere that a successful man should always be able to instinctively respond to the question of what he drinks.  I have to disagree with that; sometimes a G&T suits, other times a beer, and these days it is entirely acceptable to drink wine in public houses.  Thus Nick Clegg's triangulation policy of "Rich Tea if dunked. Hob Nobs if not" is actually acceptable.

One of the recurrent themes in Borgen, the Danish drama (highly recommended), is the volume of coffee the characters drink, and the plates of pastries provided at political meetings.  Are we seriously supposed to accept that Prime Minister David Cameron hosted the coalition's "quad" discussions over tea and "oatcakes with butter and cheese"??  Ridiculous.  

Hey, they could even make it up if they were trying even remotely to look human.  How likely is it that they would be found out if they lied?  Might a disgruntled bag-carrier or coup-plotter reveal to the world that actually Cam can't keep his grubby fingers away from the Marylands?

Maybe we made a huge mistake not putting Ed Bacon Sandwich Miliband into No. 10.  He was asked on two separate occasions, and both times he stated "Jaffa Cake".  Human, after all.