it is a miracel [sic] the economy has broadly gone on under this weight of uncertaintyAnd gone on rather well, in the (global) circumstances. Which leads me to ponder on two potentially conflicting points. First, the optimistic angle: "There's a great deal of ruin in a nation", as Adam Smith had it, meaning that an established economy can bear quite a lot of apparently destructive nonsense before it is, actually, ruined. (We've had BTL commenters here noting that Life Goes On even in Ukraine and Syria.)
In similar vein it has sometimes been noted how little difference politicians, for all their bluster, actually make on the economy: so maybe a zombie government-parliament can play its silly games without too much impact. Retrospective analyses frequently pin big economic trends on global factors, often creeping up on the supposedly knowledgeable players who are supposed to be in command of such things, taking politicians and economists alike by surprise. When things go well - as they usually do, see Economic Growth for centuries now - some folks (not least, errr, capitalists) tend to attribute this to the workings of markets and free trade.
On the other hand ... well, we could look at Venezuela. Politicians can have an impact. Perhaps more appositely (until Corbyn gets his hands on the levers), the great JK Galbraith was wont to say that economics and policy-making in the UK are more complex than elsewhere because Britain is, first and formost, a trading nation, ever since it first muscled onto the world stage at the tail end of the Tudor dynasty. (Some would say a pirate nation, of course.) There are more moving parts in our economy, many of them exposed to the outside. This contrasts with, say, the French or traditional US economies, more heavily based on agriculture and other internal resources, and more self-sufficient accordingly.
Of course, others have their problems too - one thinks of the great exporters, Germany and China. So if there's Trading Trouble afoot, we may not be alone.
Still, it can't be denied we've added an extra twist to our own local story. And if things do take a downturn, whether caused by Brexit/uncertainty, or made worse by it, or just because of global conditions, there's one other important thing to bear in mind. Whatever in detail the British Settlement has been, that has kept the show on the road for all these years without the polar-opposite, seemingly irreconcilable positions coming into stark conflict, one aspect must surely have been this: that a large and 'broadly unproductive section of society' (I am choosing my words carefully here) has accepted its lot without taking to the streets, just so long as it keeps being paid to watch daytime telly.
If the City can't keep laying the golden eggs, and that financial transfer to the rest of the nation can't be afforded in future; well, then ...
ND
24 comments:
There are certainly bits of evidence to show there is a great deal of ruin in a nation.
There are also bits of evidence to the contrary: and much more than looking just to the likes of disaster states such as Venezuela and Zimbabwe.
Consider the 2007/8 Great Recession.
Underlying causes strike me as twofold and (long in advance) not that seemingly likely to be disastrous (unlike for V, Z, etc).
Cause 1: governments with a political desire to increase home ownership (eg to improve equality) - by encouraging mortgage lending at too high a proportion of the securing asset - and by encouraging lending to those whose financial security was, to say the least, viewed too optimistically.
Cause 2: banks wishing to trade more profitably by having less of their equity and other assets (just in case) locked up in the back room. And nation state governments world-wide going along with that seemingly OK 'easing' of regulation.
Who knew those 'little' changes would pull half the foundations away.
Of course, BREXIT (at all or on WTO terms) is much smaller beer - even if some people insist on looking only at the down-side.
Best regards
If I remember correctly it was a Clinton era policy to force banks to offer mortgages to poor people who were a huge credit risk (ie. Blacks and minorites) that started the whole ball rolling. That is to say, political meddling in private business.
Then over here, our very own reverse Midas - Gordon Brown - decided to do away with The Old Lady of Threadneedle Streets supevision of the Banks, handing it over to the newly created Financial Services Authority. Unsurprisingly, hundreds of years of stability and boredom turned rather sporty when first, Northern Rock, then others started to look rather shaky. But then again, when the FSA thinks that cocaine, crystal meth and ketamine are suitable recreational activities for a bank boss, then anything goes.
Time and time again it is proven that we need to minimise the amount of ignorant meddling that politicians do. If they are not actively corrupt, then they are stunningly incompetent.
A note on banks. I needed a couple of documents copied, signed and stamped for some legal work. I went to my bank, for which doing this was obviously the 13th task Hercules declined to do. So I went to the bank the legalese is for. No can do, external y'see, even though the solicitors are representing *them*...
So I headed to the Post Office, my eyeballs rolling so much that my pupils were like little Indiana Joneses scarpering from them.
No photocopier, if you come back with copies you've made...
All I want is a copy of each document, stamped and signed to say they're a copy of the original.
This shouldn't be difficult. And yet...
Fortunately I've an MFD at home - smaller version of the kind of thing that used to take up an entire office cubicle, and emitted enough vaporised ink to either leave passing staff as potential members of the Blue Man Group, or if it was black, Trudeau in fancy dress - so time for attempt number 4 at the local Post Office. I wonder what sitcom-esque thing will happen this time?
We won't find out as Boris (according to ConHome) won't be about for long.
No one trusts him to deliver. Which I suppose is based on a Vox Pop of his amorous conquests.
POst Offices charge for that copying services.
£5 a copy.
Which is cheaper than doctors at £25 a copy.
or the solictors for £25-£100 a copy.
BlokeinBrum - It was a Clinton initiative that Bush then put on steroids. People were warning about it at the time, this from 2000.
https://www.city-journal.org/html/trillion-dollar-bank-shakedown-bodes-ill-cities-12096.html
"The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.
The CRA's premise sounds unassailable: helping the poor buy and keep homes will stabilize and rebuild city neighborhoods. As enforced today, though, the law portends just the opposite, threatening to undermine the efforts of the upwardly mobile poor by saddling them with neighbors more than usually likely to depress property values by not maintaining their homes adequately or by losing them to foreclosure."
Anon: It's government by wishful thinking. Banks didn't lend these people money for good reason; these people weren't gainfully employed, had no savings or saving culture and were mostly incompetent with money. They were a terrible risk. You could see it here with the payday lenders. As Tim has said before, to lend short term money to high risk borrowers, you have to charge a very high APR to cover the losses from the defaulters.
When morons in Government stuck their oar in and forced the banks to lend money it was only ever going to end badly. But by that time the idiot politicians responsible would have moved on to well paid sinecures elsewhere.
We are not an island when it comes to immigration.
We ARE an island when it comes to economic depression.
(According to Remain.)
We'll take the EU with us at least, if depression does happen. It's possible that the German banks will go bust first.
Anon at 4.42
Boris doesn't seem sure if he's in, out, in, out. We'll all be in for a squeeze soon enough.
@BiB: " incompetent with money" and part of the 'broadly unproductive section of society' There are many such. I have found they don't seem to actually understand numbers, multipliers or percentages at all it simply gets put on the "too difficult" pile. The payday loan advertising seemed to be aimed at actully making the interest rate number as large as possible, they must, I mean must have worked out that people thought a big number was better! :(
I remember whan I first got married (in '71) having to go to the bank in person to "negotiate" a £25.00 overdraft facility. To be fair to the bank I was only 18 and only earning £16.00 per week nett but even then I had my numbers lined up: rent £7.50, housekeeping £5, work expenses £2.00(greasy spoons and ciggies) therefore money to pay bank back £1.50/week (I know these numbers seem ridiculously small but are real).
What I'm trying to empasise/demonstate is that you are correct banks were boring and hard to borrow from for a good reason!
Back to ND's subject the bread provided by London and surrounds/The city and the circuses provided by TV/internet are absolutely essential to a quiescent public at large.
Brexit and many other political circuses pass them by it simple goes on the same pile as the arithmetic.
The long term issue is that of debt.
You see this with commercial enterprises such as Thomas Cook. Eventually the business gets overloaded with debt as management fail to adapt to the existing business environment. Hard decisions are put off by management and the 'Priciple Agent' problem means that a lot of management types make out like bandits then bail when the shit hits the fan. Shareholders take a kicking and can't do anything about it as the big shareholders are the hedge funds and city types who always seem to end up smelling of roses. They often seem to rotate round in a narrow clique of Regulators/Hedgies/Fund Managers /Management types, all from the same public schools.
You can see the similarities too with the way the country is run. An out of touch elite, running things to their own advantage. Always coming up trumps no matter how badly they run things.
But the small shareholders are getting bolshy and think they ought to have a say. And there's a lot more of us than them..
I would narrow the focus slightly
The issue seems to hit home not when you borrow a lot but when the asset and liability are mismatched in terms of duration and risk.
Northern rock lent for 20 years and borrowed iirc on an average of 2(?) So when short term money dried up their business died.
There are also stories of all the ninja mortgages. Nothing wrong with high risk lending as long as it is appropriately priced (at a price where the only takers will be those who erm might have something to hide)
On 'broadly unproductive' well i look at what i do and on a bad day would term it that but a lot more swearily.
We can all stand in a circle and point at multiple others.
Just because you do not have a job does not mean you are broadly unproductive.
My dad (88) is stepping back from the parish council, local church committee and the sales manager and cartoonist to the parish mag.
Amongst other things.
I think he - who has not worked since age 53 - is more broadly productive than me.
BiB - a propos of shareholders / governance, have you seen this blog?
http://labourandcapital.blogspot.com/
We used to have a bit of contact with Tom (and have carried his link for yonks)
Andrew - I am very sure he is, and he was not at all who I meant
(how about 'never in their lives at any stage, whilst being major consumers of benefits')
The fiscal surpluses produced in London and the SE actually go to preserving the unity of the Realm; looking at tax transfers, they go to NI, the NE, Wales and to a smaller extent Scotland. Rather than subsidising fecklessness, I think they actually subsidise long-term structural change in the UK economy and inequalities of geography.
If we're serious that every citizen, whether in the sparsely populated and seasonally challenging terrian of the highlands or in leafy London suburbia should enjoy a daily postal delivery then we must accept that inter-regional tax transfers are necessary.
Likewise, many of our northern cities grew to such from 17th century villages because of primary industry, trade and manufacturing. The inhabitants of Manchester, Burnley or Doncaster are no less diligent, hard-working or thrifty than those of Bexley or Surbiton. There was a time when Manchester cotton built large parts of the City of London - what goes around comes around.
That's what being a United Kingdom means - we are stronger together.
(how about 'never in their lives at any stage, whilst being major consumers of benefits')
I work with lots of these people and you are very welcome to come along and sort out their lives / give them the benefit of your worldly advice. You'll learn a lot.
You might even apply to be a UC work coach. They could do with someone with all the solutions.
Many habits, both good and bad, are picked up from the family environment whilst growing up.
Middle class youths benefit from stable surroundings, a good family support network, good education and similar peers.
However there is a considerable 'underclass' coming from a radically different background. Single parents, unemployment, alcohol & drugs, poor educational outcomes and aspirations.
I think that there is a need to prioritize stable families and a solid education.
I also think that bending over backwards to hand people things on a plate is counter-productive. It's not poverty that causes poor outcomes, but people feeling disassociated from society and feeling that they haven't a stake in it.
me too, Anon @ 8:16. And believe me I don't have "all the solutions"
Per Raedwald above, inter regional transfers are necessary. But the aim at all times is to make them transitional, towards something better. Here are a couple of things they shouldn't be:
(a) they shouldn't be permanent & thereby just ossifying a problem. In the USA, with its greater mobility, it is assumed that over time people will move to where the prosperity is to be found. We're less like that but permanent "dumb transfers" are no solution (although Raedwald's remote postal service is an acceptable residual state of affairs)
(b) they shouldn't be passive: "here, take this cash, pipe down, shut up, and get back to your deep-fried mars bars"
Labour are beginning to say something similar - it's related to this:
http://www.cityunslicker.co.uk/2019/07/labour-turns-against-social-mobility.html
But rather more interestingly, McDonnell said something I have to agree with (for once). He was speaking, I think, in Liverpool, and he said that [Liverpool] shouln't be satisfied just endlessly being bailed out by the City. I'll go with that.
Nick - I don't disagree at all. But such changes will take a generation or more to work through, and welfare payments are often an attractive proposition to the Treasury as an alternative to re-skilling (training and placing a redundant 50 yo steelworker into a FT job as an IT technician may cost £75k - cheaper to pay welfare in the short term, and maybe even the long term as the retrained worker may never reach a level of employability / productivity that gives payback). Better to train their children or grandchildren.
One of the very few benefits of Blair's expansion of the HFE sector is that it gets large numbers of young people used to mobility - social and geographic. Moving to live in a new city 300 miles from home can be a life-changing experience
And already the impacts of AI are creeping into the City - those huge trading floors, acres of open-plan office and dense transport systems may fall into desuetude and hundreds of thousands of commuting workers no longer be required. Just as the importance of ownership has given way to the supremacy of regulation, the City of the future may be an intellectual affinity, a co-operative conglomeration of UK finance interests, rather than a geographical nexus. It's not impossible that our London suburbs are the dole-dormitories of the future. What goes around ...
important points, Mr R
one thing abt AI on trading floors (aside from the old debate about what's AI and what's machine learning etc)
I have seen this creeping into energy trading over nearly 20 years. It doesn't reduce the number of people required. The basic result is that many, many times more trades get done - orders of magnitude more, & more complex ones, too: and many more companies are playing in the space. All the SIs and s/w vendors bang on about Sraight Through Processing (STP) and sure enough, it's a thing: but the sheer increase in scale & complexity (and then the next one, and then the next one) mean you need a lot of knowledgeable eyes on what the STPs are chucking out. Sure, it's automated - but it needs oversight, governance and intervention, at every stage: front office, mid office, back office, dispatch. Just when you think you can sack the entire back office, the next big increase in flow and complexity comes along. (Remember that when this all started 20 years ago it was a couple of trades a week and the back office was half a person with a spreadsheet.)
The only thing really working in the opposite direction has been banks pulling out of energy trading altogether
maybe FX etc are different: and maybe the big 'AI' breakthrough is yet to come - I don't know. But I do know it's been predicted for a very long time ...
One of the worries with high frequency trading and increasingly complex trades by computers programmed by Quants, is that you never know how everything will interact.
Just like some of the first fly by wire aircraft ended up flying into the ground despite prodigious amounts of testing, you can't say for sure that all the algos aren't going to do the same with the economy...
Seems to me that all western nations are going to face the same problem, going down the economic pan more or less slowly. A kind of flattening out over the next 30 years and more.
We can stay in the EU and go down slowly in a controlled way or we can hitch our wagon to the ERG's top predators and most of us go down a lot quicker. Either way the left behinds are not going to see any Sunny Uplands or unicorns. The snag is I can't see any way for most ordinary people to avoid seeing their living standards shrink over time. Javid's budgets will I am sure evaporate like mist by Christmas.
Over the next 30 years we can look forward to the Tories and the Labourites swapping No 10 with neither having any useful ideas. Brexit is merely a distraction along the way. All rather depressing, go East young person.
Anon @ 8:16 here again
Whilst it may serve a purpose to debate the relative merits of the solutions mentioned above including the hint at eugenics, I would honestly encourage you to try your hand and dealing with some cases.
No more than say 100 to get an understanding of why some parts of society have issues and why the European social model is far superior to any North American one.
I can only hope you try and then see if you hold the same views.
my dear anon, I was a councillor in an urban area for many years, and have continued my local community engagement thereafter
I have dealt with people manifestly starving, who freely admitted they've correctly been found guilty of benefits fraud and end up receiving literally nothing;
and homeless people who, when finally awarded the (social) housing of their oft-stated dreams, freeze with fear on the threshhold because they have literally no idea how to be a tenant and settled resident
etc etc, we don't need to bandy credentials
eugenics?! - I'm a Tory: that's classic lefty stuff, see the Fabian Society, and, errr, Sweden ... what was that about the European model?
Despite your insight, you might want to look at the stats. Levels are very low
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/707831/fraud-and-error-preliminary-estimates-2017-2018.pdf
It is not surprising as there are real time checks on income and triennial checks on the disabled.
On the other hand you have lenders (Wonga) and banks (PPI) routinely abusing clients without a whiff of the action that those on benefits have to suffer.
You really need to get a sense of proportion and getting out of your bubble.
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