Thursday, 30 June 2016

Boris Bottles it!


Was not expecting that.

Personally, never been that impressed with the Home Secretary who is now hot favourite to win.

Gove does not even want to be PM and is deeply disliked (unfairly) for his education reforms.

That leaves perhaps Leadsom, who is too untried, same as Crabb.

Liam Fox - too right wing at a time when the Country needs unity in the face of external events.

We live in interesting times....

Wednesday, 29 June 2016

How Negotiations Happen

Among the many recent belly-laughs afforded by Juncker et al, the one about "there must be no secret, back-door negotiations" gave particular pleasure.  We all know the telecomms companies must have seen as big a spike in international secure-line phonecalls as the MSM and every other type of M have in their ratings over the past frenetic week.  Jeez, Juncker's staff will hardly have stopped talking to Whitehall for half a second since early a.m. on Friday.  Can an ordinary punter actually get a 'Business Premier' seat on the Eurostar just now?

The only person not talking to anyone is J.Corbyn.  Of course, no-one wants to speak to him either, so it works out quite nicely.

Oh, Events, Events - how we Nietzscheans love 'em.  No negotiations!  Hahaha!


Monday, 27 June 2016

We are not without paddle UPDATE

Chart forFTSE 100 (^FTSE)

So on Friday the markets took a big bath first thing.

The sole reason for this was that many large hedge funds had gone very long, on the back of their own polling, on Remain. They had bought Sterling and the FTSE250.

By the time the markets opened they had to cover their positions. If you were on the other side there was money to be made. Odey Asset Management apparently made £220 million on Friday...the parties on the other side are no being so vocal it seems.

Then to Monday, George Osborne made a good speech this morning to try and soothe the markets over. As it happens, they do not appear to need much soothing as yet. The FTSE is off less than 2% and the Pound down another 2% - all typical Monday morning moves. The FTSE100 has never recovered from last September's sell-off and remains range-bound ever since.
Chart forFTSE 250 INDEX (^FTMC)
The FTSE 250 has taken more of a kicking since Friday than the FTSE100 as it is more UK focused

Of course, the Bank of England is in the background with its £250 billion liquidity offer that is helping to shore up the Banks.

In the real world, Banks shares have fallen and Property development companies, as well as UK focused retail businesses. This is as it should be, they are indeed the likely losers from Brexit. British Manufactures will in time be marked up as their products are more easily sold.

A fall in house prices and immigration is likely now with Brexit. Whether or not we go for EFTA (we should not, but we will is my current view) as the step back from the EU, some of the benefits of Brexit will be felt - as well as some of the downsides.

At the moment, such is the capture of the media bubble by London remainiacs that nothing will sate them and all is doom and gloom x10. It is for this reason I am surprisingly thinking we do need Boris as the next PM. Whatever his faults, he is great at optimism and for the next couple of years that will be very important for the UK.


Victory Parade

We’ll all remember where we were. I’d been hors de combat all night (at a hospital bedside), but at 3 am found myself on a night bus, where a fellow night rider was calling the results off his phone. Nothing conclusive by that stage but when I went to bed at 4 am there was the first hint of dawn over the horizon from the north east - literally as well as figuratively. 

So now, a triumphal parade of the victors and the captives-in-chains 
  • Cameron 
Nothing became him in office quite like the leaving of it. He obviously came to his senses big-time in the early hours: and you gotta take your hat off. The delay in invoking Article 50 is a minor masterstroke (see Eurocrats below), echoing Michael Howard in 2005.  So much time, for so many Events to happen, for so much initiative to be deployed.  The weapon has been forged: no need to use it for a single, ill-thought-out stroke.  If Cameron continues to play the game with that degree of clarity over the summer, he’ll be well regarded for it. 
  • That old C@W favourite, ‘Strategic’ Osborne 
Manoeuvred himself right up his own fundament. The fatuous ‘punishment budget’ stunt suggests a conversation that probably took place 14 days ago ...
DC: You told me Fear would work, but it bloody doesn’t. We’re even having to wheel Brown out now! If this goes pear-shaped, you’re toast. Pull your finger out, matey! 
 GO: Errr, yes, OK, I’ll get cracking 

Now he’s not even among the Runners & Riders. Will have to play a Treasury blinder over the summer if he’s not to appear in history as the lowest form of political life. Or maybe leave it all to Carney … All those years of kowtowing to the Chinese, to underpin his 2020 government. All that promotion of Hinkley Point (EDF must be a screaming short trade). All those pathetic Tory backbenchers who grovelled to him. Toast?  Dust. 
  • Sadiq 
Clearly a bit of an operator. While the Benns and McDonnells and Hodges and Abbbottts and (eventually) Watsons are jerking off in various Westminster committee rooms and recording studios, Sadiq is actually angling to play serious power politics in a sphere of his own. Creativity-plus-initiative is everything at times like this. King over the water? It worked for Boris, and Julius Caesar. (But not for Ken. Or General McArthur.) 

PS, I did say that Sadiq was the price of Brexit … 
  • Momentum 
The McDonnell strategy is playing out. (1) protest undying loyalty to the Sainted Jeremy and his mega-mandate … (2) … in the certain knowledge this is a doomed cause; no need to be seen with a knife when every other bugger is wielding one (3) rouse the Momentum hordes into a frenzy of ‘keep-the-2015-flame-alive’ passion (4) watch Jeremy expire in revolutionary martyrdom with several blades between his shoulders (5) ride to glory at the head of the Momentum Massive (6) win the snap election of October 2016. Easy.  Actually, he must know that scenario isn’t remotely a shoe-in: but hey, what better chance does an old fully paid-up Stalinist have? 

PS what’s Watson up to? Sorry, I have no intelligence on that: but it is obviously designed to thwart (5) above. 
  • Boris 
Clever old Boris.  (Unless he offers Osborne a deal.)
  • MPs 
On one theory, there is a clear all-party majority of Remainder MPs. Parliament works by formed factions that command working majorities. If they were all as pro-EU as (say) Damian Green, one might imagine a functional Parliamentary Remain Party being created that could do, well, whatever it wanted in that cause (even appoint a PM and government of its own). If they were all really pro-EU. And if there was any serious natural leadership in evidence. 

There’s the flaw: because I reckon the majority of MPs are careerist tossers to whom the above strategy isn’t worth the candle. They’ve all got battles to fight within conventional existing-party frameworks, not least including de-selection (or being KIPpered) at the next election if they don’t get with the Brexit programme. 

Leadership? Heseltine fumes from the wings but, errr … But I suppose there may be some MP out there we’ve never really noticed. Could be interesting. Probably not.
  • Eurocrats 
Behaving as badly as ever, they learn nothing, they can’t help themselves. And, if we are correctly informed, they are about to open the sluice-gates on a pent-up flood of ‘sensitive’ measures they were holding back until, errrr, now. Good luck with making us feel buyers’ remorse when we watch you opening your doors to Turkey and banning our toasters.

Hint: there is no more BAU. If you haven’t spotted that, Merkel will be taking you by the elbow some day soon. Or the goolies. She’ll get the point across somehow. 
  • Sturgeon 
Thrashing around a bit, actually, in her proactive and articulate way. She really doesn’t want to negotiate separation terms with a confident new Tory PM, or to row off in her little boat into a world of $50 oil. And the Eurocrats may not offer her anything tasty on a plate: their instincts are not to trade with cessationists; just like the taxman won’t trade with you in hypotheticals. They’ll still be busily admitting Turkey and banning toasters. One other thought: if the Scotties are really pissed off, I’d say the prospect of copping the Euro will NOT be a major deterrent next time around. 
  • UKIP 
Interesting. Is their work done, do they go home now? The new PM had better hope not, because if the Tories get their act together, while the ex Tory Kippers will be drifting back, the Labour Party will still be haemorrhaging in that direction. Making that October election all the easier. 

*  *  *  *  *  *  *  *

Yes, quite a dawn. One that cheered up the hospital patient no end. 


Saturday, 25 June 2016

A very British coup?

It's now about twenty-four hours since it became clear that the UK had voted to leave the EU in our momentous referendum. I can tell you exactly what I was doing when the Sunderland result was announced: I was drying up my dishes in the kitchen, preparing to go to bed, listening to the TV in the adjoining room. The returning officer read out the numbers and the whoops went up from the Leave supporters; the returning officer's voice cracked slightly, she paused, then she read the Leave number out again just to be clear. It was obvious at that very nanosecond that that would be the "clip" of the night, to be repeated on broadcasts and documentaries for generations.  

There has been profound shock in the UK since that moment; and that should not come as a surprise: effectively the government, indeed the system of government, has been overthrown. This was not a simple election, but a revolution.

I have been reading Robert Tombs' excellent The English and their History; irrespective of this week's events, I can highly recommend this history. I am currently at roughly the Boston tea party, the Declaration of Independence and the build-up to the war between Britain and its Atlantic colonies. But it is the parallel with the 1688 invasion which jumps out at me. In the "Glorious Revolution" England was invaded by a conqueror. We always like to think that we have not succumbed to invasion since 1066, but that is not right. William's forces invaded and took control of the government of England. Invited by various parliamentarians, yes; accepted by many, yes; but an invasion nonetheless. A coup; a resetting.

It is no wonder that David Cameron thought he ought to resign immediately after the referendum result was known. Effectively the referendum has toppled the constitutional order which has been built up in the UK over the last forty years or so. It has re-opened that longstanding British discussion which goes back to the days of the witan. Of course, this is 2016 not 1066 or 1688 or 1776 or even 1940. But it is no wonder that the British were in a state of shock yesterday: at about 5am on Friday 24th June 2016 not only was the government toppled, but our system of government was toppled.

In a previous era there would, no doubt, have been meetings and pamphlets and even riots. Luckily, in this peaceful democratic interconnected world, people turned to social media and broadcast debates. Many do not accept the result of the referendum, but it is hard to ignore that a majority of voters, in an election taken part in by a huge proportion of the electorate, after a long and well-rehearsed debate, decided to trash the status quo.

If Thursday was a coup, it was a very representative coup. This was not a well-armed faction seizing control. This was not a liberation from an occupying force, nor the takeover by one.

I argued in the run-up to the referendum that to vote to Leave was a revolutionary act, because to do so was to overturn the decisions that have been made, within the established constitution, by elected Parliament after elected Parliament. However, I also supported the holding of the referendum, because it was so obvious that many people felt frustrated by the lack of opportunity to have their views listened to on this topic. People often refer back to Maastricht, but while that was probably the treaty which fundamentally changed our relationship with our European neighbours, I think it was the way in which the Lisbon Treaty was ratified which set us on this course. It was the failure to hold the promised referendum on the "EU Constitution", which later so obviously became the Lisbon Treaty, which put so many people's backs up. We are now the third country to reject that Constitution.

It is not my intention to discuss the rights and wrongs of the Lisbon Treaty/EU Constitution. We are past that now. I am interested in the British limbo which we now find ourselves in. We seem to have voted to detach ourselves from the entire EU machine, but many were already suggesting beforehand that we may be able to cut ourselves loose from some without cutting ourselves loose from all. 

On Newsnight last night Daniel Hannan suggested that there might be support for going back to a system more like the one the UK initially signed up for - he was especially talking about the system whereby there was a right to go and work in another Common Market country, without there being a common European citizenship or general right to live as a national in any member state. Jonathan Powell convincingly argued that the government has absolutely no mandate to negotiate anything new until there has been a general election.

We are not used to this. We have not done this very often in our long history, and we have not done it for a very long time. We have not erected guillotines, not a single shot has been fired. The pound and the stock-market wobbled, but the sky did not fall in. But be in no doubt at all: we just tore up the rulebook. We will be discussing this for a very long time.

Friday, 24 June 2016

How was it for you ? 
The biggest upset since Agincourt.

The PM has gone.
The Euro is under pressure.
The EU is wobbling

The financial markets crashed

The Pound is having a mare.


Donald Trump is flying in.

Are we happy ?

The comments are open.

A fun night ahead

boy, come on you Mackem's

Even if Remain turn this round it is going to be a fun night. Chewing wasps on the BBC. The announcer at Sunderland looked like she was announcing Jimmy Saville had won.

No sleep for me....

Wednesday, 22 June 2016

Its a shambolic way to run a country: But it works. EU really, really needs to lighten up. 

The biggest disaster that occurred in post-war Europe was Britain not being a part of the EEC. 
If the UK had been in from the start then perhaps the spirit of compromise would have been more prominent during its foundation and evolution.

The UK has and always has had, a wonderful sense that strict rules aren't really necessary. As long as a solution to a problem could be found,then a way of getting to that solution would be devised.

For example, The USA left the UK with a huge bill and a big war. To prevent this happening again, the Dominions appeared. No one really wanted them, but it was a way of having crown controlled territories with limited independent rule. And that allowed the colonial era to carry on for another 100 years from the 19th into the 20th century. Some countries were Dominions. And some were not. Some Dominions had their own embassies and consulates in foreign nations and some did not. 
It wasn't a very nailed down system. South Africa was the first 'self-ruler'. And they immediately went off invading their neighbours, and inadvertently and unhelpfully, expanded the British Empire.

The UK is one country. And also it is four countries. And little that applies to one of them applies to the others.

For example, England, Scotland, Northern Ireland and Wales each have their own form of devolved education. The government of the UK has an education minister. Who is only responsible for education in England. 
Scotland has quite a different system to England..Northern Ireland has some 50% of pupils attending Catholic managed schools. 95% of schools in Northern Ireland are segregated. Catholic and Protestant. Integration, despite a lot of effort post Good Friday, does not really occur. That set up is totally alien to English schools.
Higher education tuition fees differ significantly in the UK. English students can pay up to £9,000 a term. In Northern Ireland the cap is a maximum of £3,800. Wales is also £9,000 but a grant of up to £5,190 can be applied for. In Scotland they are free.

English law applies to all the UK. But as common law. Northern Ireland and Scotland have their own courts. Scotland has its own legal system that has some differences to England's.The United Kingdom,despite being one country, does not have one legal system, under one ruling government.

The UK does not even have one ruling government. The election winning government does have all the power. It controls the cash, It sets the taxes. It declares the wars. But the devolved institutions have limited power too. And limited responsibilities for managing them. At present Scotland has a ruling party that is almost wholly opposed to its own ruling government in London.

At the current UEFA championships England, Scotland Northern Ireland and Wales compete separately. In the UK football in Scotland is totally separate to Football in England. Wales is part of England's football leagues. Cardiff and Swansea can play in the Premier League. Glasgow and Celtic were refused access. 
The UKs athletes compete in the Olympics as the UK, under Team GB. 
{the term Great Britain excludes Northern Ireland. But N.I. are in Team GB..hope you following all this,EU.} There is no England cricket team, It is the England and Wales team. Scotland and N.I. have their own teams.  In Rugby each national team competes separately.

The Channel islands are not a part of the United Kingdom. They are considered a part of UK territory for war purposes. An invasion of Sark is an invasion of the mainland. The channel islands use UK postage rates, which are applicable to all home nations. A stamp in Guernsey is valid anywhere in the UK. Despite the channel islands not even being anything to do with the UK and not even in the EU. Southern Ireland cannot receive 1st class mail. They are 'abroad' and use continental postage rates.

And UK currency is the acceptable currency of the Channel Islands. But the channel Islands produced notes are not legal in the UK. But can be exchanged 1 for 1 by the banks.

The official notes produced by the Bank of England are only legal tender in England and Wales. Scottish and Northern Ireland notes are not legal tender anywhere. Not even inside their own countries. Isle of Man notes don't even have the word "Sterling" and are not acceptable in the UK. {But, as you can gather from the pattern here} UK banks will exchange them one for one. And anyone accepting a note can freely exchange with their own bank or the bank of England at a one for one.

Transport. Policing. Health. All different. 
What does the UK government actually do for all? 
Declare war. Sign EU treaties. Attend summits. Benefits and pensions and it sets the minimum wage,. Something that should be absolubtely be devolved.

The EU also has all this mish-mash itself. Some countries are in some bits and not in others. Some laws apply and some don't. Some taxes are applicable to all and some are nationally set within limits.Some tiny countries are free of duty and taxation and some are not. Some have opt outs from certain legislation and some do not.

The difference between the UK and the EU, is no one much cares about all this in the UK. Its a totally different system for buying a house in Scotland. So what? People just deal with it. There is no move to unify the systems.

Even the unfairness in tuition fees and hospital parking fees isn't really an issue. Its who's picking up the bill for it all that is the contentious part. The idea of having different ways of doing things in the different Home Nations, isn't of any real concern.  Many people in the UK would be unaware of many of the things above. It isn't an issue that comes up often. And its all historical, anyway. It stems from our organically created single country combining different nations over a very, very long period of time.

So, EU. Its a shambolic mess that no-one would want to replicate. We know that. 
But that doesn't mean it doesn't work. And all the EU nations have formed in a similar fashion, over a similar time frame as ourselves. And all have oddities and exceptions and contradictions.

So..if some want to do one thing and some want to do another...find a way of dealing with it.
And that way, the whole survives.

And, surprisingly often, prospers as a result.

Small Modular Nuclear Reactors

Here's something I missed earlier in the year (can't imagine what might have distracted me): the government is holding a competition for proposals to develop Small Modular (nuclear) Reactors.  Yes, really!  And there was us thinking they've bet the farm on the Hinkley white elephant.
Graphic:  Sarah Cohen

SMRs are said to offer a corrective to the general direction of travel of 'conventional' nuclear plant development costs which, tracking EDF's ridiculous activities across Europe, are headed for the strato-sphere.  The first point about SMRs is, you build lots of 'em in proper factories, instead of one-offs in some remote and soggy field a long way from where engineers and manufacturing resources actually live.  So you get economies of scale & experience.

Post Piper Alpha (as I have written about more than once), pre-fabricated modular onshore construction revolutionised the costs of offshore oil & gas development - in the highly-desirable 'downwards' direction; it being even dafter to build stuff offshore than it is in a remote & soggy field. So the concept has a very encouraging precedent.

Secondly, SMRs being small and (so we are invited to believe) jolly safe, you site them near centres of population where the power is actually needed (unlike certain types of 'renewable' power plants we could all mention) - another big advantage.  Then you can run district heating off them, making use of the epic amounts of otherwise-waste heat that issues forth from nuclear power generation: yet another big advantage.  

The rather worthy Energy Technlogies Institute has done a lot of work on this, and concludes there are approx 50 towns in England & Wales (but not Scotland, hoho! - the SNP won't play) that could benefit from one or more SMRs.

But they ain't saying which towns these are!  The government wouldn't like premature publication ...

So - come on, you thorium and molten salt enthusiasts!  BTW, on the subject of Hinkley did you know that EDF have given a name to the radioactive turd? It's Zingy?  Seriously!  Who said the frogs have no sense of humour?


Monday, 20 June 2016

The final week

It could be for England, 6 changes to the team and a banana skin awaits them tonight...

no wait, wrong blog post...oops

I meant to say Leave has drifted to 5-1 today on Betfair - no doubt as the tragic Jo Cox murder sinks in as somehow Leave related and also the final big guns for Remain are joined in battle.

Plus  every down movement in the stock market is Leave related in the media, every up movement is ignored or because magically polling has changed.

Still we will see, even I as a total political anorak, am now thoroughly bored to tears and want it over and done with. Still, 1/5 in a two horse race, back to the Footie analogy its like Scotland playing away to Spain...

Friday, 17 June 2016

Peak Binary

The Capitalists extend their condolences to the family and friends of Jo Cox MP. We are democrats, and that means having it out in an entirely non-violent, non-aggressive manner. One of the Enlightenment innovations which England gave the world was a political system which was noisy but peaceful; adversarial with mutual respect. Let us not allow that to be undermined.


One of the things most frustrating about recent elections - including recent and upcoming referendums - has been the ludicrously simplistic choices we are forced to make. 

Labour or Tory? Yes or No? In or Out? These decisions are hideously bald. Scots could not vote for their most-favoured option of Devo Max. We couldn't say "no thanks" to Ed Miliband's anti-capitalism without saying "yes please" to George Osborne's steady-as-she-goes.

This has been especially brought out in this current vote on the EU. Let's be honest here: the EU has brought some amazing things to our shores and to others. Open skies. A proper competition regime. The massive reduction in state aid. But at the same time not many would deny the undermining of democratic accountability, horrendous protectionism especially in food, and the appalling mishandling of the single currency and common border area. Yet we are asked to vote for or against both baby and bathwater. We cannot tell Parliament what we might like instead.

It is high time we introduced a bit more nuance into our political system. If we don't, we should expect voters to remain frustrated and feel powerless to change anything. We are forced to take least-worst positions, and we wonder why campaigns turn negative so early.

I don't have a simple answer. Maybe it involves PR and smaller parties. Maybe it involves greater local autonomy and tolerance of divergent approaches. Maybe we need to survey people's views more thoroughly between elections. I don't know.

All I know is that asking people silly questions begs silly answers.

Thursday, 16 June 2016

Money Talks at the Guardian

By way of distraction from the interminable referendum ... our new Mayor, the upright Sadiq Khan, plans to ban posters like this on the buses and tubes. 

Not favoured by Khan
"The ads could 'demean' women and encourage them to conform to unrealistic or unhealthy body shapes."  Sounds like a serious critique:  and in that case the next port of call for his campaigning fervour will, therefore, presumably be the Grauniad.

The worthies of the Scott Trust beg to differ
Then again, maybe not - all that journalism and coverage of critical under-reported stories needs all the support it can get.  And the young lady in their illustration certainly lacks 'coverage' ...

Oh, alright, back to the referendum.


Wednesday, 15 June 2016

DIY Select Committee Fudging

When the old boss of BHS went before the Commons Select Committee last week he had a great wheeze  - tell the committee there were lots of relevant facts and he would be submitting them later. Boring stuff like actual figures about how much he was paid, how much he owed the company etc. Not important at all to the discussion.

Then the old, old, boss of BHS comes to the committee today and proudly states that he has Deloitte working on a plan to save the BHS pensioners. Very worthy of him too.

Of course, the plan won't be ready for a week or two (this reminds me of myself at work, Monday, things will always be done by Monday - best not to be more specific than that in terms of timing) so sadly it can't be discussed today.

So there we are, how to Kipper a Select Committee, come with a not quite ready plan and promise to send interesting stuff in the future, when you won't be summoned again or will be in some far off place. More likely, the media will have forgotten and no one will care anymore before Beck has left Posh for Cheryl or some such...


Monday, 13 June 2016

Sending for Gordon Brown?!

Isn’t it shit? 
Deepest despair 
Project Fear running aground, clutching thin air - 
Sending for Brown! 

Badly amiss? 
Losing the plot! 
Brown of the big clunking fist, glowering Scot
Why are these clowns 
Sending for Brown?! 

What did they find, knocking on doors? 
Finally grasping - Remain’s a lost cause! 
Making his entrance again with his usual flair 
Under his breath, still cursing Blair 

Don’t you love farce? 
Dave’s fault, I fear 
He thought that we’d want what he wants … 
Sorry, my dear! 
So why is the clown
Sending for Brown? 
Oh bugger, he’s here. 

Isn’t it shit? 
Isn’t it queer? 
Dave simply chucking his once glorious career? 
And turning to Brown 
It’s all turning Brown 
Calamity’s near. 


Brexit rumbles on but not for much longer now

I can't believe that less than two weeks away from the referendum we are in a zone where many remainers are totally infected with self-doubt and are openly talking about Leave winning.

This should have been an easy Remain win and it is hard to see why they have lost the case so badly. There are only 2 brexit winning arguments, the first, which is where I stand, is that the EU is a non-democratic entity not given to improving Europe and hopelessly tied to the failing Euro. The second is that it has promoted uncontrolled immigration.

Neither of these should be insurmountable, the first is too challenging to explain to the General Public in an election campaign, and on its own terms should be a struggle to convince to vote for given the economic doom forecasts of leaving.

The second was very easy to deal with, go to Europe, get a break on immigration controls for a few years and declare victory.

Of course, Cameron could not do this at all and so we are where we are, with the vote on a knife edge with only a slightly larger chance of remaining than leaving.

Over the next 10 days a few stories are going to be huge too and keep the referendum off the front pages:

1 - Orlando  - a muslim anti-gay terrorist story is a bad thing for the Remainers and Lefties in general and they try and square a circle of pro-gay and pro-islam stance.

2 - Euro 2016 - many brexiters, including myself, have better things to do with this than worry about the vote.  Perhaps if England are expelled and the fans sing FUCK THE EU enough it will help remain as that will repel so may people (I love that chant!). Either way, much of the population of voters is not listening.

3 - Pisotorius sentencing - this may only last a few days, but is right here now.

So Events may yet swing it, certainly it is an interesting place to be. The Pound has dropped a lot today, showing the City trader remainers are indeed worried.

Sunday, 12 June 2016


David Smith's article in today's Sunday Times is an excellent read, as usual. He makes the point that the UK has done very well within the single market since its creation in the early 1990s. The numbers seem to be nailed on. In his words, we would be daft to quit the single market now, as we are still in the shadow of the Big Crash.

David Smith is one of my favourite economic commentators, and I have praised his books which explain the big issues in ways that non-technical people can understand. And his arguments are compelling in today's article. He says that Britain has done so well we ought to keep very quiet about it, lest the other EU countries want to take our success away...

But the bald statistic his argument rests on, appearing as it does to end the economic argument for Brexit in a simple and easy-to-understand set of numbers, does not bear much scrutiny.

For example, when the single market started in 1993, the UK had just suffered a huge crash from the heady boom of the late 1980s into the ERM disaster. In 1993, Sterling had only recently crashed out of the ERM; so at least some of the 62% GDP growth that Smith quotes can be derived from the post-ERM recovery. As we all know, Black Wednesday turned out to be one of the biggest post-war blessings for the UK economy. Afterwards, the pound was able to find its own level in the market, interest rates and inflation slumped, we enjoyed the longest period of continuous growth in recorded history. Some of that was thanks to the single market, no doubt, but cyclical factors are definitely at play.

In contrast Germany, which recorded a comparatively sluggish 35% growth in the same time period, had different domestic issues to contend with. Germany, as I am sure David Smith will remember, had recently expanded to take on the formerly-Communist eastern states. Re-unification was (and still is, to an extent) extremely tough for Germany: the Ostmark was converted at far too high an exchange rate; wages in the East crippled its dilapidated and over-staffed industries; populations shifted, and an unsustainable boom turned to bust. Germany was for many of the years between 1993 and 2016 regarded as the sick man of Europe. Only once the Hartz reforms took hold did the economic miracle get going again. Not mentioned in Smith's article.

Meanwhile France. Well, France: what does one need to say? France always somehow managed to keep up with other big European economies, but it has suffered a massive loss of competitiveness (compared with especially Germany) since locking itself into the Euro. The same goes for Italy, whose economy is smaller now than it was before the global financial crisis. Britain beats Italy and France? Big deal.

Smith's article does not mention the disaster of the Euro which has crippled two of the three economies his chart benchmarks. He also compares us with Japan and the US. We come in slightly slower than the US (albeit from a much lower base) and much quicker than Japan, which has suffered from twenty years of stagnation over the period concerned.

This post is not to suggest that the UK could have done significantly better over the same period had we been outside the single market. My point is simply that the simple numbers used by Smith to argue that leaving the EU would be "daft" do not actually tell us anything. The early 90s to the early 2000s were the heyday of the single market. We got a lot of sensible deregulation such as the open skies and simplified product markets. When Brussels was clearing away protectionism in our target markets, Britain and the rest of the EU probably did much better than they might otherwise have done.

But these numbers offered by Smith offer no counter-factual (for example, there is plenty of evidence that plenty of countries outside the EU have done better at selling into the single market than the UK has done) and, crucially, they offer absolutely no evidence that the single market works for us now and will continue to do so in the future.

Friday, 10 June 2016

New China Syndrome: An Interesting Business Model

I have recently encountered an interesting phenomenon which, having been alerted to it, probably means it is quite widespread & maybe even structural.

Chinese firm A is trying to justify making an overseas asset acquisition.  (They are clearly acting under instructions as part of the Great Haul of China project to buy up the entire universe.)  Said asset would, naturally enough, be a lot more attractive if it had a full order book for its output several years forward.

Enter Chinese company B, with a big multi-year order.  What a happy coincidence, eh?  These are the things that make the world go around.  One could imagine such arrangements being replicated all over the place.  

The flaws in this entertainingly circular business model are rather obvious ...   When the man with money meets the man with experience, the man with money gets some experience.  As they say.  

Personally, I have a nice bridge over the Thames for sale.  Its value would be incomparably improved if it had a long-term tolling contract with a big international trucking company willing to commit to using it for all its cross-Thames business for the next ten years.  Nice weekend, all !


Wednesday, 8 June 2016

Brexit, Seriously?

I love it when the press get in a lather. It is a most amusing spectacle. Even on the old fashioned TV thingy's, seeing the pundits justify what they said yesterday was only a dream is most entertaining.

Of course, a funny thing is actually happening this week. With the referendum coming closer some people are starting to make up their minds. In polls, it seems there is a small break to the Leave side so far and this has meant "PANIC! DISASTER" for London liberals/Civil Service/Government etc.

However, the same thing happened in the Scottish referendum. The first load of don't knows decided to break for Independence and the polls narrowed a lot. It was in the balance on the day but ended up with a decent Remain win. Perhaps the nationalist waverer's are more determined than the "Remainers" resigned to their fate?

Nothing happening now strikes me as different, except that a sinking of  boat load of immigrants off the Kent coast the day before might push Leave over the line - events, dear boy, events.

As for myself, after long period of shame, I am about to post a bet. A few days ago I bought a few quid of USP3 (I manage to miss the big leg up of course!). This is an ETF long-short bet on the $/£. My reasoning is the Pound will struggle for the next 2 weeks as Brexit is now looking close and won't be settled until the day. Plan is to sell out of the position come what may on June 23rd. Thus far a pointless 1.5% up - but still good to have some money on the result. Of course if Brexit looks like it is coming home then it is a good one to leave on as I guesstimate there will be an 8-10% spike devaluation over the next week or so after the result.

Tuesday, 7 June 2016

A journey of a thousand miles...

Hardcore Brexiters need to learn a little patience. In their rush to get to the end, whatever that is precisely, they risk tripping over and falling flat on their face. Polls suggest that Leave could possibly win, although most people still think it quite unlikely. Yet any discussion of what a post-Leave process might look like is attacked as if carion by starving hyenas. Witness the Leave campaign's distancing from Patrick Minford's unilateral free trade option, for example.

Those who matter have started to suggest that after a Leave vote a majority of MPs could resist the UK's departure from the single market. Pure-blood exiteers jump on that as a sign of betrayal of the people's [assumed] choice, but it is anything but. For the referendum poses an interesting constitutional question in the event of a Leave vote: what comes next? The ballot paper is carefully designed to give no further information beyond In or Out of the EU.

A decision to Leave the EU generally presumes that Parliament will "take back control", to repeat a mantra. But a sovereign Parliament is free to delegate its powers, as it does already. Surely Parliament will respect the referendum result, but the referendum does not give any further instruction to our legislators and executive. A vote to quit the EU does not imply that a majority of voters want to leave the single market, however much a win for Leave may or may not be based on anti-immigration rhetoric. (It is not even clear that the some of the leading faces of the Leave campaign are interested in a hard stop on immigration: as Will Hague points out, a points-based system need not result in any particular number of newcomers. Jeremy Warner also makes some good points about visas, if you have the inclination to read his recent Telegeaph article.) If Parliament genuinely cared about immigration, it could halve the level immediately by blocking all non-EU arrivals... Personally I suspect that  immigration is an extremely important issue to a relatively tiny number of voters; the smooth functioning of the day-to-day economy trumps all.

Parliament will also be aware of the possible short-term economic consequences of a hard exit. Indeed, Remain have campaigned mercilessly on this topic. No party will want to go into the next election with a backdrop of a crashed economy brought about by a bodged withdrawal which they oversaw. And no party will get off scott-free in this "balanced" Parliament.

Which is why many sensible people have long supported EFTA/EEA membership - sometimes referred to as a Norwegian model - as the first step out of the EU. EEA membership largely gives cheap access to the single market, without the CAP and fisheries nonsenses, but crucially allows members to sit outside the customs union: free to negotiate trade deals with non-EEA countries. It doesn't solve all of the sovereignty issues because the single market rules must be enacted by member countries, but it does limit the areas in which the common rules apply. It does require free movement to continue within the EEA, but I suspect it would not require the UK to be part of the relocation of refugees schemes (I am happy to be corrected on this by anyone who knows more about it).

The point is that a step from EU to EEA could be very smooth and need not cause a hard stop in our trading relations with the other 27 or the rest of the world. Effectively it buys time and allows for a gradual disengagement - if that is what people vote for in subsequent  general elections - or a semi-permanent semi-detached relationship with our European friends. We do like a semi-detached here in Britain, don't we?

A possible smooth transition to something other than our current EU membership could also attract support from people who, in the PM's words, are "grumpy" about the EU but do not pine for a fortress Britain either. Liberal internationalists, for example, to borrow Michael Gove's expression.

In other words, the EEA option could be just the sort of messy compromise that moderates and centrists have said they want. In but Out, Out but Near, free-trading but semi-detached, call it what you like. And once the Rubicon of actually voting to Leave has been crossed, then Parliament and elections to it can determine where we go next. Nice and slowly, in the British way. No fruitcakery required.

Cameron of Epirus

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Political commentators were quite surprised when David Cameron decided to put himself at the centre of the campaign to renegotiate the UK's membership of the European Union. 

This wasn't a friendly and meaningless summit where the goals and possible achievements are wrangled over months in advance with a friendly communique declaring victory for all sides is issued at the end regardless of what was achieved. It wasn't the usual grandstanding jolly boys outing for heads of state to get positive PR headlines and a few days break from tedious domestic politics.

This was something serious. Something that an advisor might describe as 'Courageous'.

 - No guarantee of any concrete result, despite the negotiators being sent in advance to asses the ground.
- No guarantee of consensus from all the other EU members. Very few allies at any discussions. The ever present unwillingness of the EU to ever concede a loss of  its powers. Plus, a hostile home media very suspicious of the actions of the PM in going there at all.

Usually the leader would send a trusty subordinate to fight on his behalf. William Hague would have been just the man if he was still in post. Dependable. Reliable. Competent. Popular among colleagues. Luckily, the PM had another such man to send instead. Philip Hammond, a key Remain man, and Foreign Secretary, he seemed prefect for the role. He would have done as asked. He is very capable. When the Heads of State part came around, the PM could have flown over for the high profile, do or die moment. And to take the glory for the success in any negotiations.

Cameron could also have avoided some of the blame for the resulting minor concessions that were  eventually won. The 'thin gruel' could have been laid at Hammy's door. So avoiding the full taint of failure. The renegotiation concessions, much trumpeted before the event as a turning point in the UK's relationship with the European Union, turned out to be so feeble that they have not been mentioned by the Remain campaign since their announcement.

Fast forward to the Remain campaign and the lessons of 1975.
Wilson did not make himself the main leader for remain. He was 'pro remain' but was wise enough to be looking at the post referendum situation on his already fractious party. Wilson allowed MPs to campaign as they wished. That allowed him to return some of the big beasts of the Leave campaign to his own small majority party, with minimal fuss. At the time Tony Benn and Michael Foot were the Gove and Johnson of the day. Well known, popular figures among party members or the public.

The lessons of 2014 Scottish Referendum should have been heeded too. The Labour party that had been previously been dominant in Scottish politics for decades, had lost ground, and was looking to re-establish its control, was wiped out in the post referendum election. Completely wiped out. No signs of any recovery at all. The punishment some say, for siding with the Tory enemy over the referendum.

Why Cameron has decided to put himself at the very centre of only one wing of his party is a mystery. He may have chosen the bigger wing, for reasons that he absolubtely believes in, but that will not help him with the aftermath of a Remain victory. He has deliberately chosen to use all the power of the government. Of the civil service. Of the opposition parties and of big business to campaign for one side, with himself, and his Chancellor as the front men for that side.

David Cameron is not a stupid man. He knows all the reasons for not doing what he done.
So, does he believe he has Blair like powers of persuasion that will allow him to soothe hurt feeling and allow reconstruction after the civil war? 
Does he believe that the vote was going to be so close that only his own intervention, with all the force of his personality and gravitas as leader was the only way to bring victory to Remain? And the consequences of those actions would just have to be dealt with later once victory was assured.
Or does he think, what the hell..I'm going in one or two years anyway. A new leader can sort all of this mess out much easier than I could anyway. I'm off..

Tory Remainers are probably backing that the labour party is in such a mess that it doesn't matter too much what they do to themselves. They have plenty of time, with the fixed term act, to rebuild a consensus. And the woeful Corbyn isn't remotely interested in short term political point scoring and a long term undermining strategy anyway.

The flaw in all of that is it is likely to get a lot more fractious before it gets less. That the economy is bound to tip before the next election so damaging the one favourable Tory constant since 2010, economic management. And that Corbyn is unlikely to be leader for 2020.

Labour MPs will not allow another leader to ruin their best chance of power since 2010. A divided, damaged, floundering Tory party, without the full backing of its usually supportive media is an easy target for any half decent opposition leader.

To imagine Labour will just blithely continue not to have one is wishful thinking.

Monday, 6 June 2016

Panic is an Ugly Spectacle. Bring On Merkel

That's it, really.  Project Fear is failing and panic has set in. 

And I'm not sure the Remainders know how to parley their panic into anything more attractive.  Running focus groups would be a good line of business to be in right now - they'll be commissioning ten a day from here on in.  ("... and how would your feelings change if we told you George Galloway would be Prime Minister if we leave?  Kim Jong-un?  Bill Cash?  Richard North?  Fred West?")

Can't wait for the promised intervention from Merkel!  (Or was that it ..?)


Thursday, 2 June 2016

BHS goes the way of Woolies

Despite all the hand-wringing, BHS has gone to the wall as was entirely predictable.

No one came forward with enough cash to cover the gaping hole in working capital. Unsurprising, when as a retailer you start to fail it really is a tough time, you get insurances withdrawn and credit facilities with suppliers withdrawn and from there it is a steep mountain to climb back up; most never do.

Now the Government will have its fun looking into Sir Philip Green and Damon Chappell - but who will spot the obvious business model issue as the true cause of the decline. Well, there are no grandstanding votes in that so no one will.

However, the taxpayer is on the hook for the pensions as was always likely and will most likely happen with Tata steel too. Surely not there has to be some legislation, somewhat counter-intuitive, that stops companies making pension commitments that they won't be able to keep and then get lumped on the taxpayer.

Of course, with defined contribution schemes, that is already the case. We need now though to make them de riguer in the public and private space so that the future tax burdens of the Country are not even more utterly horrendous than they are already.

Given our politicians at the moment though, they will probably decide the opposite solution is better....

Wednesday, 1 June 2016

UK Population Growth 1970 to present


One of the key themes of the referendum is the level of UK immigration. For Remain it is their Kryptonite Weakness and for Leave their sole source of potential victory.

Equally, both sides are happy to spin their way through any discussion. But these charts tell us what we need to know. In the 1970's, the UK's sick man of Europe schtick kept people away and the population even shrank as people fled the Socialist Republic. By the time Thatcher had finished her reforms in the late 1908's a baby boom and more immigration meant the population started growing again.

Then in the early 2000's Blair made his fatal mistake of allowing unlimited East European immigration and population growth really took hold. Looking at the chart below it soon overtook its historic trend line and posted above average growth rates. In absolute numbers it is much the same. Between 1970 and 1990 less than 2 million people were added to the population numbers. Between 1990 and 2010 another 3 million were added then in the last 3 years alone another million have arrived.

Clearly, the growth rate is heading towards exponential levels. Whatever Remain say, people are dead right to be concerned at the growth rate at a time when Government spending on services is at best staying the same in real terms.

Something has to give, if Remain are right a recession post-Brexit will make things temporarily worse, but perhaps a bout of 1970's attractiveness as an immigration bolt hole is just what the patient requires.