Monday, 30 November 2015

Commodities Rout

"BHP Billiton has lost 41% of its market capitalisation this year. Anglo American has shed over 66%"
Seeing this morning's comments on the shocking performance of big mining stocks prompts me to stick this up:

Reuters/Jefferies CRB Commodities Index     Source:  StockCharts.com

That's the lowest for a very long while.  Yes folks, it's not just oil, commodities are having a lean time of it.  To be fair, BHP has other problems as well, it never rains but it pours etc.

They will be hoping CU's mission to China this week can stir up demand a bit ...

ND

Friday, 27 November 2015

Paris Climate Talks Loom: What Will We Get?

COP21 is not a new accounting standard (!) - it is the latest round in the protracted series of climate-change boondoggles, this year to be held in Paris.  It may all be a bit subdued this time around, of course: but M.Hollande is really very keen for it to be a success - well who can forget the demented circus performances of, e.g. John Prescott at Copenhagen in 2009 (COP15), amongst other COP debacles over the years.

Hollande has been working like crazy to get a Proper Result, ideally "legally biding" but at any rate something a bit better than Just Plain Embarrassing.  It is fair to say that before the latest terrorism outbreak he was thinking about little else.  In the way of these things, he's been trying to square it all away in advance.  His diplomats are rushing about everywhere on this mission: in fact *ahem* I happened to be sat next to one on the flight back from Africa this summer, who had no idea who I was and from whom I gathered that because the Chinese and others are really not at all interested in "legally binding", the best Hollande will get is something incredibly thin.  But maybe better than No Agreed Communique At All, his greatest nightmare.

We have had a bunch of FCO types beavering away on all this, too:
201 FCO staff work across climate-themed initiatives, with 79 counting this as their full-time role
Why? I hear you ask.  Why indeed, but apparently a large number of them are for the axe - after Paris - as part of Osborne's draconian policy-change away from all the green crap.

The question is: what has the UK delegation been mandated to agree? I suspect they don't need to say very much because anything coal-powered China and India are willing to sign up for, I'm guessing we won't find too onerous.  Of course, the worry would be that Europe is up for some self-harming 'leadership' role in all this, spewing money in the direction of developing countries for 'renewables' (you know, like 5 litre V8 Range Rovers for the president and a slush fund for his extended family) and accepting another round of infeasible 'targets'.  Except that I think not:  Germany seems to have had enough, with Merkel having pulled the amazing '2100' can-kicking stunt back in the summer.

As well as his recent round of policy changes - pulling the plug on the CCS nonsense being the latest - Osborne has given us another big clue in the Tory Manifesto, which said, inter alia:
We will not support additional distorting and expensive power sector targets
I reckon those are carefully chosen words, and that we may infer GB won't be signing up for anything that can't comfortably be delivered.  The days when Tony Blair let us in for a renewables target for energy believing it to be for electricity, are hopefully long gone.  Renewables targets per se are truly fatuous, even for someone who wants to see CO2 emissions reduced: the great Professor David Mackay, formerly DECC's scientific adviser has recently spilled the beans on the outright countr-productive nature of this, and the government now understands the logic of the situation.

Still, Osborne's policy-making has disappointed us all royally on occasion, so we shall have to wait and see.  The rhetoric is ramping up on all sides (artists for COP21, children for COP21 ...).  Will my optimism be rewarded in time for Christmas ..?

ND

Thursday, 26 November 2015

McDonnell, Mao and Yeo

I am in a ridiculously upbeat frame of mind just now, it obviously can't last.  The John McDonnell / Mao thing is just so funny.  These eejits just can't help themselves: they are totally resistant to spin-doctory advice, based on a lifetime of not giving a toss (and of being listened to by an average audience of three Trots, a couple of Respect voters whose grasp of English is not that of a native speaker, and a granny who didn't manage to get out of the social club before the comrades started their meeting).   So they are doomed to crash and burn.

Thus we have the spectacle of most Labour MPs, every newspaper, and half the CiF brigade declaring the rather trivial episode to be a Total Disaster; while the other half-CiF cries "where's yer sense of humour?" in a rather plaintive fashion.  Haha! - I know where mine is.

Actually when it comes to Chairman Mao (and I shall continue not to say 'Zedong', on no less an authority than the Chinese Embassy from which I obtained the volumes pictured herewith), although his Little Red Book (which in 1972 I was given for free!) is no great shakes, his Selected Military Writings (for which I shelled out 40 pence of my own money) are a really cracking read, I would recommend them warmly to any student of military matters.

The thing is, I can say this, McDonnell cannot - in the same way that no elected politician of the Right can enthuse about Nietzsche.  The reasons are stupid but compelling nonetheless, and only a rank amateur misses the point.  As they say in the army, if you can't take a joke, you shouldn't have joined: or in this case, if you want to be free to speak your mind, you can't be a front-bench MP. 

Speaking of which, I laughed like a drain when I saw the verdict in the Yeo libel case.  Haha!

But it can't last, I know this.

ND

Recession predictions post Osborne plans

From various sources:

RBS economists: 2017/18

RBC Capital: 2018

Jones Lang Lasalle: 2017

HSBC Economist forecast: 2018/19

Of course economics forecasts are tomorrow's chip paper. But the UK Government has staked its financial credibility on their being no recession.

With one, the Country's finances will be very quickly back in the mire of 2008/12 in terms of its overall deficit.

Considering the Tory domination of the political stage, why did they make such a bold gamble that could well lose them the next election with the economic credibility in ruins a la 1997?

Wednesday, 25 November 2015

Osborne scraps tax credit cuts

- Backs off in the face of opposition

- Replaced by heroic forecasting of economic growth in next 5 years

- Huge cuts to transport budget and other non-skollznhozpitals spending

A good political 'budget' shoots all Labour foxes.

I wonder though, if this timidity is shown now, what is going to happen when the economy turns south in the next few years?

Tuesday, 24 November 2015

Oh, America

You know there's a 'but' on the way when someone starts with a list of credentials ...

I'm a big fan of the USA and these are my credentials.  I have family there (US citizens).  I have three times been employed by American companies, and thrice thrived.  I have done a lot of business there, and made most of my money there.  I have travelled frequently, not only to New York (which is easy for Yurpeans) but to other, less atypical US cities if you'll pardon the double negative like Chicago, Houston and Dallas.  I am a big believer in American positivism (political as well as business), even if it has often been my role as token Yurpean to inject a note of realism from time to time.  I am even more a believer in the American attitude that runs: if the deal you're proposing works for us, we'll do it! (as compared to the wretched traditional Yurpean response: since you're the one proposing the deal, we'll only do it if we get 95% of the benefit ... actually on second thoughts we won't do it at all).  After the financial crisis I staked quite a lot of my money on the proposition the USA would recover faster than Yurp.  And in my soldiering days I have worked alongside fine, professional American military types as an ally.

But.

Recent developments in American universities really make me wonder whether the great nation is slowly committing suicide, in some sort of decline-and-fall melt-down of decadence that would gratify a chinese marxist theoretician (not to mention an islamist).  Item 1:  'generation wuss' - we've looked at this a couple of times - which as well as whimpering in its 'safe spaces' is now throwing a massive chain-reaction tantrum, seemingly to prove there is no future for rational discourse there.  Given the massive proportion of Americans who attend university (as least, to 'study' for one of their very dubious first degrees) this could be a bit of a problem unless decisively countered by the grown-ups in a confident assertion of rational values.

Item 2:  'generation meds'.   At face value it seems that not only can these coddled, contemptible narcissists not survive outside a 'safe space', they even need to be doped up to the eyeballs with prescription drugs for their precarious collective mental health.  

This can't possible be a generation fit to carry forward the flame.

Or am I just showing my age?  There must have been similar reactions to the Class of '68 and their LSD-addled anti-war protests.   American first degrees are rubbish, but their doctorates are not, so clearly they sort things out in the long run - or used to.

Still - doesn't appear to bode well, does it ?  Someone tell me please I'm wrong.

ND

Monday, 23 November 2015

The CBI View- women don't to eat or enjoy sports

This story, typical of the BBC, really is identity politics run wild.

The new head of the CBI, Carolyn Fairburn, a lady who has known few boundaries in her own life, has decided the world is not enough to her liking.

"Business Dinners" are apparently now not suitable events to organise for woman. I can see her point, clearly women don't eat and so would not want a free dinner and a chance to network with like-minded people....oh wait.

Of course, the baby issue is raised, poor Caroyln had 3 children and a busy husband so it was very hard for her to manage being at the BBC or McKinsey's and have a perfect time with the kids too. So of course, what needs to change is everyone else. There need to be events that are appropriate for women and at family friendly times too so as it works for her.

Then she extends the whinge to sports events too, clearly these cannot be appropriate for women either, as women don't like sport etc etc. The fabulos irony of labelling women like this when taking such a position is clearly lost of dead Caroyln.

Jesus wept, where do they find these people? I can only imagine how total her euro-enthusiasm must be to add rules and regulations to everything as it is needed to make her life easier.

Heavens forbid that people hold networking events early in the morning or into the evening because, you know, there is work to do all day and this is extra's - stuff which you don't actually have to do either.

Personal identity politics is one of the most annoying scourges of our age. Everything has to be about me and what I want, if it isn't then it must be discriminatory because I am a woman/man/mum/single/gay..blah blah blah.

If you are wondering why I have taken such offence to it, another little gem from last week. At the two minutes silence for Paris last Monday across the city there were plenty of people refusing to join in and making a scene because other people had died, in Turkey, Lebanon, Iraq etc, who had not had a minutes silence for them. It is really sad that people so readily use and abuse such atrocities as excuses to virtue signal.

Friday, 20 November 2015

Rudd's 'Energy Policy Reset' - Oh Ye of Little Faith!

Well here's something to brighten a stormy November weekend: Amber Rudd's speech!  Yes, after 'taking the summer off to review energy policy' she has at last got around to announcing what George Osborne's she's decided - and in some respects it's as good as I was hoping all those months ago. As part of our usual service to readers, I've read the whole thing (eight pages of 12-point*) - and here's what you might like to know.

The good bits (all verbatim quotes, in sequence as they appear in the speech) - and some of them are really good:
  • energy security has to be the number one priority (usually the last refuge of a scoundrel but in the current political context - i.e. displacing 'decarbonisation' as top priority - it's important)
  • in the next 10 years, it’s imperative that we get new gas-fired power stations built
  • we need to get the right signals in the electricity market to achieve that
  • subsidy should be temporary, not part of a permanent business model
  • we need to work towards a market where success is driven by your ability to compete in a market. Not by your ability to lobby Government
  • intermittent generators to be responsible for the pressures they add to the system when the wind does not blow or the sun does not shine. Only when different technologies face their full costs can we achieve a more competitive market
The potentially good bits (many require qualification, see below; direct quotes again, except the last bullet):
  • we now have an electricity system where no form of power generation, not even gas-fired power stations, can be built without government intervention (important she recognises this, and for what it is - a Bad Thing)
  • we are already consulting on how to improve the Capacity Market. And after this year’s auction we will take stock and ensure it delivers the gas we need
  • we will not support offshore wind at any cost (unfortunately this doesn't mean 'not at all', it means 'no blank cheques')
  • our most important task is providing a compelling example to the rest of the world of how to cut carbon while controlling costs
  • Ofgem ... will remove the barriers to suppliers choosing half-hourly settlement for household customers
  • National Grid as system operator has played a pivotal role in keeping the energy market working. But as our system changes we need to make sure it is as productive, secure and cost-effective as possible. There is a strong case for greater independence for the system operator (this needs careful interpretation, see below)
  • heat accounts for around 45% of our energy consumption and a third of all carbon emissions. Progress to date has been slower here than in other parts of our economy (another important thing to recognise)
  • we cannot support every technology (hopefully calling an end to the inane policy of 'the more stupid the idea, the bigger the subsidy')
  •  ... and she makes scant reference to CCS, which is highly appropriate since it doesn't exist
The residual depressing stuff  (my summary):
  • the ongoing fantasy-obsession with nukes
  • dangerous insouciance on the soi-dissant 'European Energy Union'
  • willingness to continue some subsidies and some 'support', even if on a reduced scale
With a list like that it's hard to go through all the necessary qualifying remarks, even for weekend reading, I could be here all day.  But here are a few:

-  'improving the Capacity Market' could be a recipe for even worse dirigisme, if Sir Humphrey is given the task
-  notwithstanding the amusing self-appointed task of telling the rest of the world how to control costs (a classic Osborne provocation!), we wait to see how much backbone the government has for the baleful Paris COP21 negotiations later this month and beyond
-  'half-hourly settlement for household customers' is a two-edged sword, dangerous in the wrong hands
-  the opaque reference to the National Grid is getting at a very important issue: in brief, they have every incentive to give misleading advice on 'what is to be done', because they get a guaranteed rate of return on their capital investment ... a pretty shocking instance of moral hazard
-  defining 'progress' on 'heat' could be a tricky business: it's a huge issue with equally huge potential for massive policy errors (and as Rudd has recently pointed out, DECC doesn't wholly own this one)
-  the European Energy Union might just work in our favour, but on balance I'm thinking the risks outweigh the opportunity: another post on this in due course

By the way, the "government declares an end to coal" is just a smokescreen (haha) for the headlines, duly swallowed by the MSM.  It's a heavily qualified 'policy' with minimal content and, notwithstanding its emptiness, acres of wriggle-room besides.

Anyhow let's put the caveats to one side, at least for this weekend, and give credit where it's due.  Well Done, George Amber!  

Next week you can crack on with the rest of my checklist:  scrapping the Hinkley deal;  toughing up the 'Energy Union', the Paris conference, little Gummer the Bummer + his useless Climate Change Committee, and the SNP's 'Scottish Energy Policy';  fixing the biomass regulations ...

ND

________________
* and that's before the redacted 'political' passages

Wednesday, 18 November 2015

Mythbusters

All over the internet, well the small bits I look at, you see some of the same nonsense being spouted over and over again. I think people read stuff they agree with and then take it to be truth because it fits their existing worldview. Is that called confirmation bias, maybe?

1. Britain is in deflation

This is just lazy. You can tell the quality of a commercial "news" outlet by the (incorrect) use of this term. Call it an economic shibboleth. Britain is not in deflation. Britain has had for the last year or so no growth in the consumer price index. Some months it has been negative, which means the consumer price index has fallen (slightly) over the course of the preceding twelve months.

A negative inflation rate is not "deflation" - it is negative inflation. Deflation is when the economy is shrinking, the money supply is shrinking, demand is shrinking, and thus prices are falling. Britain's economy is not shrinking, it is growing at a healthy 2+% per year. The jobs market is booming and salaries are rising.

Britain is not in deflation. Sorry, CU.

2. The inflation figures are made up

This is, of course, absolute codswallop. Price indices are that. They are not supposed to reflect what each individual experiences. They are a guide to what is happening in the economy, nothing more, nothing less.

3. But They Don't Include Housing!

Another myth. The Harmonised Index of Consumer Prices (CPI to us in the UK) does include a measure of housing costs. Perhaps not an especially useful one, but one nonetheless. Of course a consumer price index does not include asset prices, that would be silly because it wouldn't then be a consumer index: not many people buy houses each year, so what would it be telling us?

The old Retail Price Index included housing costs measured in a different way, but it still didn't have house prices in it.

The old Retail Price Index eXcluding mortgage interest costs was the one targeted and widely reported as "inflation" before G. Brown switched us to the CPI measure. So the new CPI is at least no worse than the old RPIX which we used to think about in the golden olden days. The CPI tends to trend at about one percentage point below RPIX, so about the only criticism you might sensibly level at G. Brown when he switched was that he only lowered the target by half a percentage point, slackening the inflation target at exactly the wrong moment in the economic cycle. I think we should consider that ancient history.

The current RPIX rate is about 1%. I keep seeing a measure of "core" inflation quoted, and I confess I have not looked this up, but it is around 1% as well. 

Thus, we can conclude that the UK retail inflation rate  is about 1%.

4. Housing is eating up ever-more of our money young people can't get on to the property ladder aaargh

Nonsense on stilts. Paying for your own home is now as easy as it has ever been in the last twenty years. Outside London. Oh, you noticed that house prices are going up? Yes, they are, but Outside London they are only a bit above their pre-crash peak. And yet mortgage interest rates have collapsed. This means that if you are an existing home-owner you are quids in because your monthly payments have probably fallen, and if you are looking to buy, you should be able to get more home for your monthly payment. The challenge is always (always!) raising that first lump of capital to buy the first time. This is not new!

(4A. There are gazillions of people on interest-only mortgages who will retire before they pay off their homes.

There probably are some people who didn't really think about what they were doing during the big upswing. They almost certainly have a healthy capital gain stored within those bricks and mortar. One can feel sorry for individual cases where things have gone awry, but overall, if you don't understand a financial product, don't take it out. There is no human right to own one's own home by the age of 55. Nonetheless, for the first time ever, outright home-ownership (i.e. mortgage free) is the most common form of "tenure" (pet hate: the word "tenure"). )

In London things are a bit different. There is a genuine housing shortage in London, and we can't build enough new homes fast enough to accommodate the booming economy. 

Outside London homes are being built. In one of those cruel twists the decrepit northern slumtowns appear to be better at building new housing than the places which are already nice, which means that the gap in prices between "nice" places and "crap" places grows ever wider. Hopefully people will be encouraged to move to the "crap" places and make them less crap. Viva la market.

5. House prices housing crisis immigration aaaaaargh!

The place where there is a genuine housing shortage is London, and there are a lot of immigrants in London. I hear northerners, Scotch, and even the occasionally Welsh or Irish accent hereabouts. Bloody immigrants coming down here and pushing up our rents! The population of London is booming, London is sucking in labour and talent from all over the world. Of course that is pushing up rents and prices. Of course it is, because we aren't building enough new homes. You can be sure that most of those northerners who spend all their time moaning about how awful London is will move on just as soon as the London economy collapses as many people seem to want to happen.

Outside London, as noted above, housing is not scandalously expensive overall, so supply and demand seem to be more evenly matched. Clearly Market Harborough is not being oVERWHelmed!!11!

6. It's all a conspiracy to keep interest rates low and base the whole economy on selling houses to each other

Interest rates eventually end up in about the right place, because if they are held down artificially then inflation takes off, if held up artificially growth is choked off. There is always a trade-off between fiscal and monetary policy. Fiscal policy has been straining to reduce government spending, so inevitably monetary policy will be used to pick up some of that slack. This is exactly how Capitalists should like it: the state rolls itself back, low interest rates encourage private investment over keeping the cash in the attic.

The UK economy is arguably overly dependent on housing investment, but who can be surprised by that when there have been good pickings over decades and decades, and we haven't been allowing enough homes to be built? However, there is once thing worse than rising house prices: falling house prices. We are all effected by the wealth effect, whether we treat our homes and money-printing presses or not.  Rising house prices suggests that the economy is growing and that wages are rising.

I know who the first people to complain would be if London suddenly turned into Berlin with its shrinking population and massive housing surplus.

7. It's cos Fatcher sold off awl the caancelaasing

Britain still has one of the highest rates of social housing in the rich world. Socialist France and Sweden have less. In London, where popular rhetoric would have it that all the estates have been sold off to be knocked down by the Chinese, a full third of homes are owned by the state. Hardly downtown Manhattan, izzit.

As far as I know, not much sold off council housing is empty or knocked down, meaning that homes were not taken out of the market. Indeed, the release of much council stock to the private sector means that council estates are now much closer to their original goal of being mixed communities. The utopian planners of the immediate postwar period never intended these blocks to only house milkmen and the unemployed.

Kindly read the post before commenting.

Tuesday, 17 November 2015

Sleeping Giants

A terrorist organisation like ISiL. What can they hope to achieve? 
Probably only what they have managed already is as much as they will ever manage. If there were some sanity about them they would know that by a combination of their own resolve and their enemies weakness, they have made unprecedented gains that under normal world circumstances could never have happened. They would hunker down, dig in, and try and hang on to what they have gained.

Dassault Mirage 2000 N.The 'N' is for nuclear strike capability

The Islamic revolution in Iran is considered unique. A popular revolution of the people, led by the theocracy, toppled an unpopular government, almost overnight. 
No one really agrees why the Islamic revolution there succeeded and endured. The Shah was unpopular. And repressive. And corrupt. And factional. And tribal. and... 
But the same conditions could have been said to have applied to very many countries around the globe, which did not have a lasting revolution.  The most popular cause give for the enduring success of the Iranian revolution is Ayatollah Khomeini.
A one vision, driven, popular leader who fashioned the revolution in his own image and inspired others to great feats and sacrifices. A Fidel Castro leader. A Ho Chi Minh or Mao Zedong.

The hostage crisis of 1979 strengthened Khomeni immeasurably. His power increased and his influence in the Arab world grew too. But he was lucky to have Jimmy Carter and the recession as his Presidential foe. The oil crisis caused by the dramatic curtailment of Iranian oil exports of 1979 pushed the US oil price to its all time 'real-price' high, that was not exceeded again until 2008.
If had been a Bush or Reagan presidency, the response to the hostage crisis might have been different. 
"Give us back our people or we will come and get them..and if you harm just one, you will regret it just once. And that will be continuously."

Iranian terror has been a feature of the modern world. especially against the USA and Israel. The running of weapons and training of troops and insurgents to fight for the militias during the war in Iraq was particularly annoying for the USA.  But the USA had enough on its plate without invading Iran as well. Like the US in Vietnam watching the Chinese and Soviets supplying the North Vietnamese, with the most sophisticated air defenses on the planet, they knew they could only fight one war at a time. Iran was a solid, mostly united, fully fledged nation. Difficult and expensive to topple quickly. So a strangle by sanctions policy was adopted instead. That did, eventually, bear fruit.

ISIS have no such luxury. They are not a unified, well led, determined and resourced nation. 
The only reason they are still in being at all is the weakness and and unwillingness to fight of its western opponents. The same weakness that allowed the Fuhrer to occupy the Rhineland and the allies to do nothing is that which protects ISIS. The knowledge that the answer to aggression is war.
And all the unpredictability that brings.

The UK and USA lost the Iraq war. The US adopted the same post Vietnam strategy of defending Iraq, that, as in Vietnam, was nothing more than face saving and failed just a spectacularly as the defence of South Vietnam had gone in 1975. Total failure.
Neither UK or USA have any desire to embark on a foreign adventure with boots on the ground that will require a commitment of 250,000 combat troops fighting an insurgency for twenty years. Neither has the money or the resolve. Neither nation's civilians want anything to do with a second war. France wanted nothing to do with the first one.

But ISIS are supremely foolish if they mistake this unwillingness for a lack of ability. The western powers are fighting ISIS with a tiny fraction of one percent of their ability. When Hollande said he would respond, he could, if he had wished, have fired nuclear battlefield artillery into the ISIS strongholds and destroyed them utterly. Five men in an AMX-13
Instead he has called for an attack by France and its allies on ISIL. A call to arms. A call to war. Putin has referred to the French as 'our allies'.

This, in all likelihood will come, in some form, to fruition. The UK, US, France and Russia, by moving into only second gear, will destroy the black flag strongholds.


ISIS attacks on mainland France and the bombing of the Russian airliner has brought about their own destruction. The western democracies may be weak. But they are weak by choice, not by resource. It is a fool who imagines press reports of defence cuts means an unwillingness to fight. It simply means an unwillingness to spend.
If a reason occurs to spend tomorrow, then the money will be found. Its only the willingness to take action that is lacking. 
An ISIS machine gunning of a school, pub, cafe or a village hall in the UK is all it would take to make the people demand action. demand invasion and retribution. Attacks on holidaymakers is a horrific act by madmen. Attacks on our homes demands retribution.

The attacks outside their own sphere was the one thing guaranteed to force the democracies and the Russians to face ISIL head on. And to defeat them in their homeland. A strategic error by the leaders of terror that will bring about the end of their dreams.

"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."
 attributed to Japanese Admiral Isoroku Yamamoto regarding the 1941 attack on Pearl Harbor by forces of Imperial Japan. Almost certainly was the invention of a script writer for the 1970 film Tora!Tora!Tora! 

But the sentiment stands.

Deflation here to stay?

inflation graphic



One thing to notice re the inflation figures is that they are totally dominated by energy costs. It is easy to forget the price of food is determined by costs of transport and refrigeration more so than the cost of land and husbandry. Thus food and energy prices has pulled down prices overall this past month.

With the price of oil falling, still falling and looking likely to fall further with record crude inventories (although refineries are not at full pelt, a wonder of the market for another post to come) the price of oil is going nowhere but down for the rest of this year. Bar a major crisis in a producer state it will stay this way for another year or two.

If oil continues its slow fall, then deflation, or something near to it, is almost inevitable for foreseeable. This makes bad reading for Government finances and the deficit, which will grow in real terms even faster and for government finance another nightmare the triple lock guarantee given to pensioners looks even more expensive.

For the country as a whole, I am less sure this will kick off a death spiral, clearly there are many warning signs in the economy suggesting hazards ahead, but deflation need not be a destroyer.

What it will mean though in the medium term is more quantitative easing to 'ease' any slowdown.

Monday, 16 November 2015

I'm Sure We All Have Our Own Views on Paris

Some months ago I saw an article explaining why terrorist attacks do not constitute an "existential threat" to western society.  The writer made much play of numbers: how the hundreds or (in the case of 9/11) thousands of deaths are - in coldly objective terms - of trivial impact; and that in a world where nuclear weapons have actually been used, and genocides perpetrated, we should know better than to class terrorism in the same league.

This is the unsubtle stuff of a student debating society.  "Existential threats" don't always come in the readily identifable form of the Spanish Armada or the Battle of the Atlantic.  Deaths don't need to be benchmarked against the First Day of the Somme.  "The most striking feature of Islamist terrorism in Europe is how little of it there has been" - OK, but that's Nick Cohen writing on Saturday, and he certainly sees a serious threat: the death-knell of European liberalism is what he fears is ringing in his ears.

I too believe today's threat really does merit consideration in extreme terms; my reason is different to his.  It's the capitulationist tendency I fear among politicians and populace alike: so many prone - as human beings - to detect quickly which way a strong wind is blowing, and to look for a quiet life (see the first, third and fourth letters in this predictable little batch).

Is it in bad taste to use French illustrations?  Vichy is one, Submission is another.   M.Hollande has offered fighting talk, but for every De Gaulle (and Churchill) there is a Pétain (and a Halifax) and the 98% of an entire population that inevitably falls under their sway.  I know dozens of MPs.  There are very few of these artists of the possible who, when push comes to shove, would draw a line in the sand anywhere, on any issue - provided they can see their way clear to being re-elected.  And who doesn't keep their heads down when enemy tanks are rolling down the street?

The full-cycle dynamics of the threat, then, are to do with what the 'deal-makers' amongst our elected representatives will concede if they really feel the wind blowing in a new direction, in this case if they detect the terror-merchants have the stamina and strategy to match their evil intent and their current resource-base.  As it happens, right now I could see it going either way.  All the short-term frontier-closings and extra-bombs-over-Syria are no more than phoney-war stuff, activity for the sake of being seen to act, neither here nor there.  We are waiting for the first signs of the main event.  To us a sporting metaphor, a lot hinges on whichever side scores next ...

What might the next move be?  Even the Guardian opines that "the defeat of Isis in Syria will not dissolve the threat of jihadi violence, but it is a necessary step on that road. That will surely entail military action".  A very probable next play, I reckon, is a spectacular intervention by Putin's plentiful forces.  Russia is suffering a lot - from low oil prices, sanctions, insulting political gestures from the west and very insulting commercial terms from China, their market of last resort.  Getting onto the right side of some of these issues depends on Russia being promoted to the status of our enemy's enemy and that, he will feel, is within Putin's power to deliver*.   Whether he's right about that or not, it seems to me he is entirely likely to follow something like Raedwald's suggested course of action, shortly after there is clarity on the downing of the airliner in Egypt.

We are told that the G20 is already becoming a series of little breakout meetings on Syria.  Putin is still a member of that club (as are Saudi and Turkey and indeed China - altogether a more meaningful forum than the G7), and he'll be sniffing the air, alright.  

Perhaps Obama can call off his bear-baiters and get more of the world back onside, which is what is needed - as a first step - to eradicate the threat posed by the combined forces of the terror-merchants and the capitulationists.  

"You ask, what is our policy ... what is our aim? I can answer in one word: victory."  Half the reason we won last time around was that everyone, from modest families in terraced houses to Franklin Delano Roosevelt in the White House, knew that Churchill meant it.  

ND

*Where does that leave Ukraine?  That's an interesting one.  Might see Russia contenting itself with Crimea.  At the same time, the EU might find itself losing interest, too.  Last year's issue ...

Friday, 13 November 2015

Oil: Brent below $45

- having crossing the significant $46 mark earlier in the week.  Oh, and it seems Sweden did reinstate border controls today.  Wars and rumours of wars ... have a nice weekend !

ND

Is the economic boom ending?

It always had to happen, as it always does. Normally the UK has operated on a 7 year economic cycle from boom to bust since the second world war, with a year or two's grace at either end. Of course, with the huge crash of 2008 (coming seven years after the dotcom bubble burst in 2001 when there was a recession in a few key areas of the economy, now overlooked), we would expect the resulting recovery to have a bit more legs left in it.

Certainly, a fall in input prices of oil and commodities should be very stimulative to the overall global GDP. But the World Bank has been cutting its forecasts. Post 2008 the main global growth engine was China which is now rapidly slowing down.

Closer to home, with debt levels still very high in both the public and private sector in the UK, there is no more room to stimulate demand. Housing supply shortages also drain money from more useful economic activity to pay rents instead. The biggest dove in the Bank of England is forecasting a reduction in UK economic activity

My own direct experience of the market at the moment is seeing management start to discuss the next downturn - be it one year or two years away. Certainly, when this happens in the past my experience is that it comes quicker than we think.

Having said that, in 2011 in the Euro Crisis the UK managed to avoid recession in the face of a calamitous external event and a big jump in Sterling. So, the die is not yet cast and perhaps a very shallow drop-off is on the cards for the UK, even if the likes of China and Brazil fair worse.

One thing I can't see though is how the UK will avoid a significant economic slow down before the next election; perhaps a window will open for Mr Corbyn after all? The state of the UK public finance is poor when faced with a renewed global slowdown.

Thursday, 12 November 2015

Mohdi does it, could Boris?

Narendra Modi, who until three years ago was banned from the UK.
India's Prime Minister is at many things to many people. One part Hindu Nationalist and another economic reformer. His personal life is somewhat strange and yet accepted.
A difficult man overall. His visit to the UK though is very well thought out in political terms. Indian Prime Ministers get a lot of stick for spending money on overseas adventures. Imagine if in the UK we had the real poverty that exists in India, the left would be indignant of the Government spending even a penny on excess. Lest we not forget, the Indian communist party actually runds states in Eastern India too.

So to counter this, Mr Mohdi, who has a large entourage of acolytes, hit upon a good wheeze. He is addressing tomorrow night Wembley stadium where 60,000 tickets have been sold and this will pay for both his trip and also the coffers of his BJP party. So he combines fundraising and cutting Government expenditure all in one go.

Perhaps after all this quality would be something we could expect if Boris Johnson ever became Prime Minister; he could write columns in foreign newspapers, appear on their comedy programmes and charge of a few after dinner speeches. Certainly it would be an innovative way to reduce spending by the Foreign Office.

Wednesday, 11 November 2015

Power Cuts Ahoy?

Seven years ago around these parts we used to do an occasional series, "watching the lights go out".  Back then (was it really 7 years ago? - yup!) we noted that 2015 looked like being the crunch year, and dismissively reported EDF offering new-nuke power from Hinkley in ... 2017, hahah.  Indeed, EDF's chief frog-in-the-UK said we'd be needing his bloody new nukes by 2017 because otherwise he wouldn't be getting hot Christmas dinner. 

Well 2015 is certainly set to be crunch-year;  EDF are now offering new-nuke power by, errr, 2024 at the absolute earliest;  by 2017 the capacity margin will almost certainly be negative, as everyone knew even back in 2008; and last week we had the first NISM of the new era.  It won't be the last.

Now some silly things have been said about this, not least by the DTel who said the Grid was using its 'last resort measures'.  Not so -  the Grid has no end of tricks up its sleeve before actually shutting off power to residential customers.  And a NISM is only the lowest level of three emergency stages it can trigger before Granny is finally plunged into darkness.  

The thing is, it's a crass way to run the whelk-stall - crass, and expensive and, of course, CO2-intensive, because the further down the slippery slope the Grid goes, the more diesel gennies spring into life:  firstly the standby diesels the Grid itself has contracted for these purposes; then the privately-owned diesels that various industrial customers maintain against the day when the Grid pays them to come off the system (stages 1 & 2), and then forcibly kicks them off the system (stages 3 and blackout);  then the hospitals' diesels (stages 3 & blackout); then (on a tiny scale) private individuals' diesels (blackout).  And the CO2 output of this lot is as bad as or worse than coal, with the particulates being a lot worse, hahah.  Check out that black smoke, greenies

Amber Rudd is promising an 'energy policy reset', and it can't be quick enough.  But the mithering about missed renewables targets doesn't make one optimisitic on this score.  An entertaining sequence of winter crises lies ahead.

ND

Tuesday, 10 November 2015

Brexit games commence

With the Prime Minister looking like he has finally decided to the the EU referendum out the way, the  Remain campaign has sort of launched. The pure power of the Remain campaign can be seen for the ease with which the Prime Minister can get Enda Kenny and Mark Rutte, Prime Minister's of Ireland and The Netherlands respectively, to row on his side.

Less effective is support from the useless CBI, but still, shilling for Europe is something that that organisation has been on doing for decades now; it is hardly going to change its tune now.

With the date now looking set for the middle of next year, the Remain campaign can put into play its two main strategies, Project FUD and the actual delay of negotiations to unbalance the Leave campaign.

These two strategies have a good chance of success. FUD worked well in the Scottish Referendum when it was deployed on real unknowns - such as what would the end state of leaving look like? Exactly the same strategy will be applied to the UK referendum - what will leaving the EU look like?

Of course, no one can know, particularly when the Government won't set it out and moreover will not even have the terms for staying in agreed until the end of the first quarter of next year at best. This leaves the field clear for 6 months to set in stone peoples' fears about what leaving the EU may do.

I really hope we do leave the EU as it staggers from one crisis to another of its own making. However, from a campaign perspective, Remain has the best hand by far.

Monday, 9 November 2015

Oil Price Revisited

Banks and other sage commentators are wont to publish oil price forecasts - why, I do not know.  Back in March - yes, March 2015, when WTI was $48 - here is what the pundits, gazing forward a mere 6 months, were predicting for 4th quarter, i.e. now.
UBS                         50
Barclays                   52
SocGen                    54
Bank of America       57
Deutsche                 57.5
Intesa SanPaulo        62   
Morgan Stanley        70
Commerzbank          72
ING                          73
Std Chartered           84
And where is WTI just now?  $44, since you asked: it's been below $50 for four months.  And these people have jobs! - as my mother-in-law says.  Well, I suppose there are a few more weeks left in 4Q for something to come along and restore the average back up to, errrr, $84 ...

Here are some things they should think about carefully, from the famous BP Statistical Review, 2015 edition.  Exhibit One:


There's a lot of oil in them thaar hills     Source:  BP
Growth in proven reserves of natural gas is equally impressive.  And by way of another salutary factoid: in all the chaos, how do we think Iraq's oil production has fared?   A bit inhibited by all that fighting, maybe?  Exhibit Two: Iraqi production, 2005 - 1.833 million barrels per day;  2014 - 3.285  mmbpd, having increased consistently year-on-year over that decade.

Oh yes, plenty of oil'n'gas around: good luck to the Greens and all who believe in peak-anything.  Where next?  Well I'm staying out of the forecasting business, that's for sure.

ND

Friday, 6 November 2015

Morally indefensible not to bomb Syria

Michael Fallon, my local MP, has said this in Parliament yesterday. Apparently so sick is ISIS that is if morally indefensible not to bomb them.

But what about Assad, him too apparently though less is mentioned these days.

The thing is, the US and now Russia and the UAE have been bombing ISIS for a while and yet their boundaries of control remain the same; perhaps at least we can say they are not expanding geographically.

The potential bombing of a Russian airliner this week shows though that the psychology runs deep and ISIS tentacles now spread across much of the muslim world. Even with ISIS wiped out in Raqqa, I can see a decades long struggle ahead as people flock the the idea of a death cult.

So bombing alone is not working and indeed overall will not work. But surely if the case is morally clear, then a UN mandate could be agreed on for the whole world to agree to intervene.

The UN has its chocolate teapot credentials well established, but even this entity managed to agree to the first gulf war. If ISIS needs to be destroyed and Syria stabilised and all of Russia, US, UK, China, Turkey, Saudi, (Even Iran!!) etc agree then surely a global compact could be reached.

Indeed, for the longer war, a global compact is exactly what it needed, to show even the disparate nations of the world with their differing aims and agendas can agree on challenging pure evil when it appears.

But as to Britain further getting involved in the current mess, I see no purpose at all. Our airpower will make no difference, there are no boots on the ground, the strategy is a mess with enemies fighting each other and by proxy.

There may be a moral case, but there is no realistic real world case that would make a jot of difference with hard power. Soft power is still the answer for now.

Tuesday, 3 November 2015

Clamouring to be Best Friends

As we wonder whether the UK has any friends left willing to do a bit of trade with us, and whether we have simply to content ourselves with China, up pops Evgeny Lebedev (proprietor of the Inde and the Standard), advocating that we cosy up to Russia, too!
Shouldn’t Britain be that very thing, the trusted intermediator, that Russia seeks..?  Britain should not be leaving it to the French [*spits*] to mediate between Russia and the West. For all the greatness of this island nation, for all its hard and soft power, there is a laxity in our approach to the Syrian crisis. Meanwhile, a plague is spreading, bringing terror to our shores. As we become smaller, others grow; and we should join all our allies in fighting the real threat to humanity now, which is Islamist terror. Picking up the phone to Moscow would be a good start.
Could use some friends ...
See - everyone wants to be friends!  And, as well as trying to pip us to the Putin post, Hollande has shot off to Beijing for a bit of his own Xi action too (which reminds me, I need to write about the Paris Climat 2015 thing).

Oh and Merkel offers to be friends, too!  Does this mean no-one wants to play with her in the German playground any more?  Wonder why that could be ... (h/t Raedwald).

ND

Monday, 2 November 2015

Gramsci & George: More Heavy Political Reading

We all enjoyed the original essay on Osborne's Gramscian strategising - and here's more in the same vein, reviewing the first but also benefitting from the passage of events (dear boy), to wit the monoshambles:
The current furore over the clinical removal of the tax credits on which so many lower paid workers depend – the same workers to whom the Tories are trying to reach – illustrates vividly the susceptibility of even a brilliant strategist like Osborne to the blithe expectation that ‘the market will provide’ when state support is withdrawn
'Brilliant strategist', eh?  Just like the original, this second chappie does rather seem to credit Osborne with more than do most of us around this parish.  Or perhaps it's sarcasm, who can tell with lefties?

Can it really be less than a month ago when all seemed so rosy?

We will be keeping half an eye out for Momentum though: a rather ambiguous phenomenon with a curious blend of piss-artistry but at least a soupçon of the sinister.
... Corbynism as a Gramscian ‘primitive political bloc’ that has mobilised several constituencies whose support will be critical to any progressive electoral coalition, including newly energised younger voters, left radicals, the environmentally conscious, and anti-austerians. But Labour urgently needs to extend its appeal beyond that bloc. The new leadership’s Momentum initiative indicates an appreciation to reach out to a wider audience. It is simply too early to say whether Corbyn’s Labour has the ideological flexibility to build on its core base. At best, a long, difficult road lies ahead as the party seeks to follow the example set by the Tories in 2005
ND

Back from the basement...

Map of Middle East


After two weeks of travelling in the Middle East (well the non-warring bits, so a very small area sadly), I come back for once to find not much has changed. Luckily, we have avoided a stock market collapse in Sept/Oct for another year so we can look forward to the lukewarm rise into the New Year.

Also, a total obsession with this Tax Credit thing, which in the annals of Government is really very small beans, rumbles on. Moves are afoot to change the Lords no less - an annual discussion that has now been going on for 100+ years so we know where that is going!

As for the Middle East, a strange place it is indeed. Oasis of wealth and security in amongst hatred and misery; rather like a large version of London with better weather.

The biggest thing that I can perceive is the rapid descent of Saudi Arabia. Fighting a war in Yemen and against both Asad and ISIS in Syria and Iraq; all the while the price of oil remaining subdued. The country is really screwed in the short-term. So much so it is hurting the Hedge Funds of Mayfair, diddums for them of course. In the longer term Saudi has enough money to ride out a five year storm; but the sort of projections here I feel are fantastical when it has used up 10% of its foreign reserves in one year.

My travels made me think of a challenge though; which is the more decrepit civilisation - Iran or Saudi. Clearly this is a bottom fishing exercise but equally it would perhaps guide us to who will win their Middle East cold war much as the USA beat Russia in the global cold war.

Sunday, 1 November 2015

Passion Fatigue

I doubt very much that the rise of social media has fundamentally changed the human psyche, but might it have catalysed pre-existing behaviour and brought it to prominence? Everywhere you look, there is unabashed passion on the internet (and no, I am not talking about the world's oldest money-spinner!).

And it carries on offline, too. Since when was it at all appropriate for actors to sign off their performances with a generalised rant about the political issue of the day? Where did this worldview come from, where so many people think that their opinion is valid and anyone who disagrees with them must be fundamentally evil?

A trivial but perhaps relevant example: I follow a few sportspeople on Instagram. Instagram, in my experience, has avoided most of the nonsense you find on Twitter by simply being about posting photos. While it is possible to put captions and comments under the photos, it is difficult to get too "political" by posting a photo of a building/sports event/meal. However, the other day I noticed that under a fairly innocuous picture of John Terry's evening meal (grilled chicken, spinach, sweet potato mash) there were foul-mouthed rants from fans of other football teams, and equally obnoxious retorts from JT's supporters. It was a plate of chicken, for goodness' sake. 

I realise that some people take football far too seriously, but at what point does someone tapping their phone screen decide that the way to make their point is to threaten to rape a player's wife?

This weekend, the Telegraph (which is making rapid progress from quality broadsheet to childish gossip website) ran a jokey article entitled Five new taxes that British voters would actually welcome. At least the Telegraph editors have a bit of a sense of humour: one of the "taxes" Mr Deacon proposes is: 
A tax on leaving comments denouncing online articles that the commenter manifestly hasn’t read. 
A leading think tank recommends a 5p surcharge for every use of the words “MSM smear”, “Wake up, sheeple”, “Tony B Liar”, “EUSSR”, and “But of course, you aren’t allowed to say that nowadays”. 
Treasury officials estimate that the imposition of this tax alone could clear the deficit within three weeks.
Anyone who has ever made the mistake of reading comments on the Telegraph website will know that he missed out "Camoron" and "Cast Iron Dave". 

Presumably these horrible people who spread themselves all over the internet are not just two or three saggy 40-something divorcees sitting in their yellowing Y-fronts in their parents' basement. For the amount of coverage on every possible different topic, there must be significant numbers of people going a bit mad when they look at stuff online. Jeez, some of them might even be Grade A professional actors. Probably many people who get caught up in this mad heat of technology are otherwise thoughtful people. These aren't the fabled Waynes and Waynettas texting death threats across the estates to their baby-mothers/fathers.

I have to say, I am simultaneously appalled and bored by it all. I am tuning out. I find I have stopped trying to discuss things with people on Twitter. I do no more than cringe when I see a Facebook friend posting a link to a Guardian article based on an absurd premise. I avoid most blogs now because the age of genuinely frank discussion appears to be over.