Wednesday 30 September 2020

The 'new normal' economy and the unknowable future

After a lifetime of being interested in and studying macroeconomics and also participating in the coal-face end of Capitalism, I have been unprepared for the loss of insight that I have suffered through the covid pandemic. 

Long time readers will know, I could see the credit crunch coming, before that I knew 9/11 would wreck parts of the economy, I could see QE becoming the chosen too to manage the economy in the West in to 2010's. Whilst seeing the austerity recovery spilling over into more recessions and perhaps underestimating the euro's hardiness, overall I feel I have had good feel for macro conditions for a long time (just don't get me to stock pick, if only I were talented at that...).

Covid world is just mental though:

- Stock prices down less in percentage terms and GDP (utterly insane and unpredictable)

- Government spending slightly higher than during 2008, but no impact on the currency

- Huge increase in unemployment but a huge boost to house prices (in my area, where I am dealing with agents currently who are true sons and daughters of satan, at least 5% in the last 3 months)

- Also huge unemployment but the highest ever savings rate since records began 

- Tourism and trade hugely down, but deflation setting into retail purchase

- Some parts of the economy smashed by the Virus; travel and leisure, retail, but then others like digital and logistics hugely boosted. 

None of the above makes any sense in general economic terms. Asset prices maybe I can see rising as savings increase and need deploying, however the huge unemployment should undermine house prices and rents - but the opposite is happening. 

The Government is busy shellacking the public finance with a second 100-year black swan event in the space of 12 years. Yet relatively the Government remains popular and the pound stable as the same rate as the past years post-Brexit. 

So, with all the above, I have lost all sense of where this is going economically. The world is changing at hyper-speed and 2021 will see a big denouement - but I honestly can't say whether this will be a bounce back to a new level of stability or a 2009 style crisis. The issue with the markets is they are driven by people and investors too and I sense nobody knows what to do or where things are going. This would suggest a huge shakeout when people and markets figure it out eventually - I just can't make out how it will be resolved yet. 

Tuesday 29 September 2020

Dissolution of the Monasteries, 2020-style

What is going to happen when the wave of local authority bankruptcies hits? 

... as, in the coming months, must surely be highly likely.  We've raised this before, and I remain extremely interested in it.   As well as serious general political interest there's a local angle for me: after 6 years of Labour excesses, mismanagement and all-round failure, my borough (Croydon) is well up there with the most indebted, over-extended councils in the land.  Others said to be near the brink are Luton, Oxford, Birmingham (!), Woking and Peterborough: and that's by no means the end of the watch-list.

There are a couple of clues as to what happens next.  This month the government imposed a new Chief Executive  - a turnaround specialist - on Croydon as the price for being willing to continue in dialogue with the Labour leadership.  There must, though, surely be a very finite pool of genuinely competent *turnaround* merchants available at short notice.  (I'd offer myself but I don't think t'unions would relish my management style ...)

The other massive clue is what happened in Northants, where the fateful day of the Section 114 Notice has come and gone.  As well as the government dividing up the old responsibilities into newly-minted authorities with revised boundaries (which sounds like doing something radical just to make the point), rather than bailing them out the government gave them approval to sell capital assets until they'd filled the hole in the ordinary accounts.  Generally speaking, a council's ability to do that is very heavily circumscribed, for obvious reasons.

So here's the vision.  Council after council goes bust.  If they couldn't contemplate rescuing Northants (Tory-held) in 2018, there's no way on earth the government is going to bail them all out: so massive, nationwide asset sales are mandated.  There's been nothing like this since the Dissolution of the Monasteries, supervised by that outright genius of an administrator, Thomas Cromwell.  And before that, the shakeout of labour relations following the Black Death.

This might actually be a major component in the dynamics of a post-Brexit, ongoing-Covid UK.  Sadly, there's no obvious likelihood of a latter-day Cromwell to execute the same highly diligent job he made of the 16th Century version.  (Cummings?  Don't make us laugh.)  Mostly, Cromwell ensured Henry got top dollar for the assets seized.  Even under his distinctly hands-on guidance, however, there was plenty of dubious cronyism involved.  We may be sure all manner of *bargains* will fall into undeserving hands at ridiculous prices - less Henry VIII, more Boris Yeltsin, I'm guessing.  Which will be depressing.

If anyone truly relishes the idea of all the pieces being thrown up into the air ... I know what you mean, but be careful what you wish for.  If Brum goes under, that'll be quite a crash.


Wednesday 23 September 2020

Centrica: Decline of an Old Friend

 Picture ... thousand words ... etc

I've always had a soft spot for Centrica, ever since they got off on exactly the right foot back in the 1990s when British Gas was triumphantly de-merged.  Maybe it's to do with the mighty relief of the break-up of that ghastly, brutal monopoly.   Newly-liberated Centrica did an awful lot right; and as the years progressed, they were clear-sighted, objective and flexible enough to recalibrate their strategies in the face of changing market circumstances (including cutting their losses decisively when called for).  Not least, they've staved off being gobbled up.

You'll find we've written about them, on and off, for years - and not always in complimentary tones because they haven't been beyond reproach at all.  Worst of all has been their nuclear gamble, when they got hopelessly carried away by their stonking coup of buying a heap of electricity from the old British Energy at the absolute bottom of the market, when Gordon Brown (remember him ...) was engineering a bail-out.  That was very good business (one of several such opportunistic bottom-of-the-market coups - almost as good as John Browne / BP in 1998), but it wasn't to last.  Participating as a more-or-less passive partner (OK, patsy) in EDF's outright purchase of BE in 2009 was crass, and they've regretted it from the day they agreed it, probably even before the ink was dry.  And they've never found a way of severing the ties, despite committing to do so by the end of this year.

Still, it's sad to see them the way they are now, cancellation of dividend and all - even if they are by no means alone among broadly competent energy companies out of favour right now.  Earlier in the year we said there needed to be some meaningful asset sales and that remains the case, IMHO.  But it seems we have to wait for developments on the nuclear front ... 

Centrica still plans to exit both E&P and Nuclear, but divestment programmes have been paused until the financial and commodity markets have settled.  

Yeah, right - doesn't sound much like any time soon.  Which must mean selling something more conventional than a part-share in EDF's mouldering, cracking-up UK nukes (with the associated energy-sapping politics that EDF wages all the time against HMG).  

Still, they remain a competent lot.  How much of that former clear-sightedness and objectivity do they retain?  The sale of Direct Energy (their big North American supply company) is a start, and must be a wrench: they bought it in 2000 as part of their Enron wannabe strategy, and grew it to #2 position in North America.  So maybe they really are up for it.


Monday 21 September 2020

Watch the markets - 2020

We all know that September is the time for big market crashes.

 1929, 1987, 2008 - All the doom was in September and October.

This year to date, despite the huge Covid-19 crisis, the markets have been quite resilient, down around 15-20% despite the GDP also being down at that level in a historic reset. 

This has been explained all year by those in the know as due to the the free money printing of the Fed and other central banks, plus the low interest rates meaning stocks with dividends have still proved popular. 

However, today has been a big hit in the markets, the FTSE is down 3.6% today alone. It could be the start of a long week or a re-bound tomorrow. 

With the Covid situation across Europe moving from good to bad though, the idea of a V-Shape recovery and the markets seeing through the downturn maybe over. Instead this could be a rocky time indeed and the start of the deep recession long-predicted. 

I guess we will know soon enough. 

Saturday 19 September 2020

Saddam's Sortie (Pt 4): More Iraqi Military Innovations

Back this weekend to the situation where thirty years ago, Saddam Hussein had invaded Kuwait, and the US-led, NATO-based effort to evict him was only just starting.  First things first; and we needed to acquaint ourselves with the military doctrine of the numerically strong and highly exerienced Iraqi army that we'd never before given a second thought to.  We'd quickly established they had incorporated quite a lot from the Soviets, as well as being largely equipped by Russia; and there were even some faint echoes of British influence (see below) dating to the 1950s.  In our arrogance and ignorance, though, we weren't expecting them to have developed some home-grown innovations, that had been amply tried and tested in a decade of all-out conflict with Iran.

Last time we described one of these - switching between specialist generals to lead different phases of the same operation.  This weekend we look at two more: one of less novelty but notable for its very extreme manifestation; the other of genuine, eye-popping novelty and not a little ghastliness.

The first was, as just suggested, really only an extreme implementation of a well-known principle, namely, that you don't ask tanks to drive very far on made-up roads.  (a) They ain't designed to run on hard flat surfaces, resulting in more maintenance outages; (b) they are not very fast; (c) their fuel consumption is truly appalling, particularly if you do take them up to full speed; and (d) they don't leave the road behind them in very good condition for any other purpose - e.g. bringing up troops and supplies by truck, a rather important consideration in a campaign.

Additionally, tanks are capital assets and not to be wasted - even if the Iraqis had quite a lot, and the Iranians not so many.  This final consideration led to the Iraqis seeing a powerful requirement for being able to switch their tanks rapidly from one front to another:  use them for a breakthrough operation at point A, then switch them swiftly to point B for further service.   Bottom-line?  You need a vast fleet of tank transporters.      

And that's what they'd acquired: by some estimates, the world's largest - to go with the world's largest combat-experienced army!  It thereby facilitated a major part of their operational doctrine: switching the location of tank forces in a trice between different phases of the same operation - rather like switching generals, in fact.

This was not wholly unprecedented in military logistical thinking, of course.  We could note:

  • WW1, where the Germans planned a lightning-fast knockout blow against France, to be followed by rapid redeployment across the entire continent for an assault on Russia by the same forces  (even if it didn't quite work out that way, of course).   In that case it was the railway network that needed to be carefully developed in preparation.
  • Israel's strategy for dealing with its equivalent frontal duality, Egypt to the west and Syria et al to the east.  Israel, too, has a large fleet of tank transporters to achieve the same effect. 

Nevertheless, the Iraqi version was impressive.  It was also more tactical in its nature than the two parallels I've offered above: both Germany and Israel saw their use of the same thinking essentially as being for a one-off, one-two combination punch of the highest strategic import - not really for day-to-day tactical deployment, which is what the Iraqis were capable of.  

*   *   *   *   *   *

I've kept you waiting for the gruesome one ...

Saddam's intended lightning strike against Iran in 1980 had, in the finest military traditions, become bogged down into a costly war of attrition.  The Iranians had resorted to human-wave tactics using the berserker-fanatics of the Revolutionary Guard, and Saddam didn't have any intention of trading numbers in that fashion.  So, unsurprisingly given what we know about the man, his mind turned to chemical warfare.  (Russian antecedents here, of course, and equipment also.)   

But there's a problem, as anyone who's ever donned a 'noddy suit' and/or respirator will know.  It ain't half hot, Mum.  And in temperatures of 40 degrees plus?  Not just uncomfortable: actually and literally unbearable for more than a very short while.  And Saddam was on the offensive; so he wasn't just going to use the chemicals for area-denial, he was intending to have his troops fight through the chemicals directly following their deployment, to capture the ground.  They had to be fully kitted-up.

Solution?  Big blocks of ice (and all the logistics required to make and distribute them).  In a front-line tent, a platoon of noddy-suited men would all huddle around a block to keep cool, until the last moment when, thus refreshed, they would be hurled into short, sharp action through the contaminated area, their ability to function fully-suited for at least a short while thereby greatly enhanced.  Clever, huh?

The gruesome bit?  Iraqi losses in some of these operations were very considerable  (Really? - ed).  Now, stemming from their pre 1960's British influences, they raised infantry regiments on a territorial basis; and so from time to time, as for the Brits in WW1, they stood to lose a very large number of young men all from the same town or region, all at the same time.  Iraqi tradition, as with many nations since time immemorial, is to recover bodies from the battlefield for burial at home.  So they'd potentially be in the awkward position of returning hundreds of bodies for hundreds of funerals to the same town, all at the same time - and Saddam was by no means wholly secure in his political grip on the country.  Not a happy political prospect.

So they used the ice on the return journey, so to speak, to preserve the bodies in order to get them back into morgues, whence they could drip-fed them back into their towns and villages over a prolonged period.

And the precedents for that?  I rather doubt it ...


Friday 18 September 2020

Friday Fun - Covid Conspiracy plans

If there is one thing that has kept me going over the past few months it is the endless litany of more and more outrageous conspiracy stories about Covid-19.

In many ways Covid is THE perfect conspiracy platform. After all, China really did do a massive job covering up how it started (and then started in its national newspapers claiming it was from a USA lab - classic maskirovka). And the virus is scary, out of control and affecting the whole world.

But, the anti-mask fanatics, the lunatics who claim it is all a hoax, the anti-vaxxers, the people who call it a plandemic and also those who claim Bill Gates wants to kill us all. 

It is amazing, a rich and deep seem on human "intelligence" and nonsense. And really entertaining, I mean check this one out for example:

"Recently, Chandra Wickramasinghe, known for his work in astronomy and astrobiology, spread the idea that the virus was living on a comet and a piece of that space rock may have fallen to Earth during a brief fireball event over China in October 2019. He further implied that comets carrying viruses may have caused outbreaks in the past as well."

Anyway, they are funny is even they help to further the idea that much of humanity is made up of nut-jobs. So what is your favourite one for the comments? Or indeed, which to you actually believe?

Wednesday 16 September 2020

Nietzsche on Woke Identity Politics

We've had cause to mention Nietzsche over the weekend.  He is not to everyone's taste:  content-wise; stylistically; difficulty (or all three).  Nevertherless his insight into humanity is the most consistently penetrating I know, along with other tremendous contributions to philosophy, psychology and even wider still.  

And nothing changes.  This is from his famous Also Sprach Zarathustra (1884) - widely viewed as the most poetic expression of his thought, and extraordinarily influential in 20th century European literature, but (frankly) no easier read than his more conventional expositions.  Nevertheless, some passages need no contextual explanation for their force and astuteness to jump out at us.  His coinage for the woke warriors and 'intersectionalists' of his time is the tarantulas.  He wouldn't have been surprised by Edinburgh University's treatment of David Hume ...


"That the world may become full of the storms of our revenge, let precisely that be what we call justice"  -  thus the tarantulas speak to each other.   "We will wreak vengeance and abuse on all those who are not as we are"  -  thus the tarantula-hearts promise themselves.   "And 'will to equality'  -  that shall henceforth be the name of virtue; and we shall raise outcry against everything that currently has power!" 

You preachers of equality  -  from you the tyrannical madness of impotence cries out for "equality":  thus your secret desire to be tyrants disguises itself in words of virtue.


Nothing changes.



Tuesday 15 September 2020

Labour suggest furlough replacement and to fight the last war, again

Quite interesting to read the news out today and the predictably stupid and vain responses from MP's. 

The news I refer too is the predictions for half a million jobs ro so to go this quarter as the furlough scheme ends. Labour of course want the scheme extended and improve upon - with more free money to pretend to keep people employed and also permanent schemes to help sectors of the economy that need it, in their view.

The Government too has its kickstarter scheme and some others, but in the round is interfering a bit less and looking at the costs a bit more. 

The Government is better here, although now is probably the time to look at the benefits system in the round and move to something more on the Swiss model. In Switzerland the Government pay you for up to a year after redundancy 80% of your wages until you find a new job - very generous indeed.

In the UK this could be a lower amount but with a credit towards re-training, which is desperately needed. 

Keir Starmer's usual vacuous soundbite is to help sectors that need support like retail and airlines. How is this of any use? We will need a lot less airline capacity for many years to come and already need far fewer shops than we used to. Plus retail is unskilled work anyway, those people in retail need some skills that maybe useful to help them earn a better living, otherwise they are going to be unemployed a long time.

Quite the worst thing to do at the moment is to try to resurrect the old economy. 10 years of cultural transformation has happened in 6 months. Offices won't be the same, working from home will be more normal and online purchasing even more of a trend. Plus staycations and home improvements. These changes are schumpeterian ones, the chaos of the recession and pandemic. Really they should be embraced to channel the changes we need into progress rather than fought against like the closure of the mining pits etc a generation ago that achieved nothing. 

Both left and right now agree with analysis that it would be have been better to close the pits and try to retrain everybody with genuine new skills rather than leave them to fester in long-term unemployment. 

So maybe let's not do that again, for example technology means we need less retail workers but far more logistics workers, why not prepare the workforce for the economy now emerging rather than the one the sun has set on?

Monday 14 September 2020

China in Iran: In Whose Dreams?

Several days ago, one of our Anons alerted us to this in a BTL comment on the "Chairman Xi" post.  Astonishing stuff ... if true.  Everyone's worst nightmare.

a large-scale roll-out of electronic espionage and warfare capabilities focussed around the port of Chabahar ... and the concomitant build-out of mass surveillance and monitoring of the Iranian population ... Iran will be an irreplaceable geographical and geopolitical foundation stone in Beijing’s ‘One Belt, One Road’ project, as well as providing a large pool of young, well-educated, relatively cheap labor for Chinese industry. The mass surveillance, monitoring, and control systems to cover Iran’s population is to begin its full roll-out as from the second week of November ... 10 million extra CCTV cameras to be placed in Iran’s seven most populous cities, to begin with, plus another five million or so pinhole surveillance cameras to be placed at the same time in another 21 cities, with all of these being directly linked in to China’s main state surveillance and monitoring systems ... will enable the full integration of Iran into the next generation of China’s algorithmic surveillance system that allows for the targeting of behavior down to the level of the individual ...

China plans to build one of the biggest intelligence gathering listening stations in the world, in Chabahar. “It will have a staff of nearly 1,000 with a very small number of Iranians chosen from the top ranks of the IRGC in training, and will have a near-5,000 kilometer radius range ... to intercept, monitor, and neutralize the C4ISR systems used by NATO and associate members, including ... Saudi Arabia, the UAE, and Israel”...   [allowing] Beijing to extend its reach in monitoring and disrupting the communications of its perceived enemies ... from the edge of Austria in the West, to Egypt, Sudan, Ethiopia, Somalia, and Kenya in the south, and back to the East across all of Afghanistan, India, Pakistan, and Thailand.

So what do we know?  Well, this much is indisputable: the Chinese are certainly engaging purposefully with Iran - and why wouldn't they?  The Belt-and-Road (westwards branch) pretty much requires it.  And troublemaking for the USA is troublemaking for the USA.  So a lot of what is confirmed public knowledge makes perfect sense and, who knows, may even be carried through - though many a grandiose plan never really works out as envisaged, and one can imagine no end of practical difficulties, cultural frictions, misunderstandings etc to contribute to the dampening of the squib.

However, the source (apparently single-source) of the more alarming prospect summarised above is clearly a self-serving Iranian briefing.  

How to assess it?  Well, the content (if not the briefing) all makes perfect sense - for China.  Why wouldn't they just love all those putative intelligence facilities in that central, pivotal, troubled region, the very cockpit of the world? (- US shale oil or not.)   That's global-major-league stuff - the reason why NATO has tolerated Turkey all these years; why the UK's sovereign bases on Cyprus are sacrosanct; why Israel always has something to offer; why several Gulf states are always able to make themselves useful; why Russia wants Syria. 

That said, the whole account (on the intelligence aspects) reads rather like an Iranian pimp-pitch to China.  Hey, fellahs, we've really thought this one through!  Have a look at this brochure!  We can offer you your ultimate wet dream!!   And I'm sure the Chinese can put it all in context for their strategic decision-making.  Doesn't quite have the air of a done deal: for one thing, what eejit would brief all that stuff if it was China's actual, treaty-bound Plan A for the next few years?  Don't we imagine there'd be a few pages of, errr, NDA in the documentation (with blood-curdling default provisions)?

In fact, given the background to the briefing, it's even more likely to be at still one more remove from any done deals.  Rather than being even an Iranian pitch-pack to the Chinese, it's probably a preview for the USA et al on what such a pitch-pack might contain.  Not so much an eastwards-facing: look what we can offer you, as a westwards-facing look what we might offer them

Indeed.  Everyone has the same dreams on these matters.

*   *   *   *   *

Equally interesting, though, is the other stuff:  the "offer" of (request for?) installation in Iran of all that ultra-invasive Chinese population-micro-control techology for directing every waking muscle-twitch of every citizen (and probably their dream-patterns too).  The mullahs want that stuff, too?

That also makes perfect sense.  The whole Chinese "social credit" thing has quite clear parallels with the way the Catholic Church operated across Europe in its pernicious heyday (and how the EC federasts, and the greens, and the Putinistas, would like to operate - if they could, or dared).  It's religious, through and through.  God is watching your every movement, knows your every thought, requires your total obedience in everything, as instructed by this vast body of totally,* ahem*, incorruptible priests ...   

Rather ideal, then, for the mullahs.  This moves my thinking on the 'Chinese Century' forward by a rather unwelcome step.  I'd tended to subscribe to the view that Soft Power intrinsically resides with the West, because everyone in the world (it seems) wants FB and Pepsi and Apple stuff and Range Rovers and freedom and etc.  Who, aside from Putin, actually wants anything Chinese (except their money and cheap labour)?

Well.  perhaps the answer is: every dictatorial regime in the world

Hmm.  The mullahs may fancy all that micro-control tech, as a big advance on what their network of Revolutionary Guards and onside imams can offer.  But the Iranian people themselves?  I've seen first-hand what Africans think of their Chinese "business partners".  And the Iranians are a pretty stroppy lot, with serious depth of education and culture and tradition.  Yes, of course, they've knuckled under to the mullahs for nearly 40 years now - after a fashion.  (Khomeini did something very clever when he took over in 1979-80: at first, he did nothing - except cancel the Shah's vast defence outlays and plough the money straight back into the pockets of Mr & Mrs Average Iranian.  Hey, this ain't so bad!   Thus mollified, they complacently gave him a couple of years to gather his forces for the Big Clampdown.) 

But are the Iranians, all 80 million of them, with easy access to guns and long porous borders and hostile neighbours and banditry and fanatics of all hues, ready to be shepherded into a Uighur-like existence in their own country?  The mullahs may need a bit more than their own outpost of the Great Firewall to achieve that.


Saturday 12 September 2020

Weekend Reading: 3 Heavyweight Offerings

A break from Saddam Hussein this weekend, and back to the future.  A couple of excellent reads here (a couple of which, if you get the same BTL google-prompts as I do, you may have already seen, if not opened).  They feed into all manner of those frivolous themes we often visit hereabouts:  the future of capitalism, the rise of China, the decline of liberal democracy ...

A.  Why Fukuyama was right all along: an essay by someone called Aris Roussinos

Everyone remembers The End of History, right?  Well -

nearly thirty years later, reading what Fukuyama actually wrote as opposed to the dismissive précis of his ideas, we see that he was right all along. Where Huntington and Kaplan predicted the threat to the Western liberal order coming from outside its cultural borders, Fukuyama discerned the weak points from within, predicting, with startling accuracy, our current moment. In The Last Man, the under-discussed addendum to The End of History, Fukuyama took his intellectual cues from Nietzsche rather than Hegel ... With all his demands met and material wants assuaged, will the last man be content at last, pausing the endless revolving wheel of history? “Left to themselves,” Fukuyama asks, “can those stable, long-standing liberal democracies of Europe and America be indefinitely self-sustaining, or will they one day collapse from some kind of internal rot, much as communism has done?” Beyond the demands for absolute equality, freedom from want and overarching authority which underlie the politics of liberalism, Fukuyama contends, “lies the question of whether there are other deeper sources of discontent within liberal democracy - whether life there is truly satisfying...

Anyone leveraging intelligently off the penetrating analyses of Nietzsche is going to get attention from me.  Having thus far only read this essay, and not the book, I'm lazily depending on secondary stuff.  But it's certainly interesting, including some points that Chairman Xi may wish to ponder.   

Fukuyama's Nietzsche-prompted ideas include, on the one hand - vis-à-vis external threats - “perhaps most critically, [liberal democracy] would be unable to defend itself from civilizations that were infused with a greater spirit of megalothymia, [the need to be recognized as superior to others - a Fukuyama coinage] whose citizens were ready to forsake comfort and safety and who were not afraid to risk their lives for the sake of dominion”. 

On the other - threats from within - “modern thought raises no barriers to a future nihilistic war against liberal democracy on the part of those brought up in its bosom.”  Fukuyama predicts, “if men cannot struggle on behalf of a just cause because that just cause was victorious in an earlier generation, then they will struggle against the just cause. They will struggle for the sake of struggle. They will struggle, in other words, out of a certain boredom: for they cannot imagine living in a world without struggle. And if the greater part of the world in which they live is characterized by peaceful and prosperous liberal democracy, then they will struggle against that peace and pros­perity, and against democracy.”

Heavy stuff.  And no less weighty is

B. Why Growth Will Fail: another book review

The book, Rise and Fall, is by Robert Gordon ("handsomely produced, at nearly eight hundred pages it weighs as much as a small dog"): the sub-heading of the review reads: 

For most of human history, economic progress moved at a crawl. Then, according to standard calculations, the world economy took off.

The centrepiece is a review of  the “special century” from 1870 to 1970—in which living standards increased more rapidly than at any time before or after - "unrepeatable because so many of its achievements could happen only once ... A central aspect of Gordon’s thesis is that the conventional measures of economic growth omit some of the largest gains in living standards and therefore underestimate economic progress. A point that is little appreciated is that the standard measures of economic progress do not include gains in health and life expectancy. Nor do they include the impact of revolutionary technological improvements such as the introduction of electricity or telephones or automobiles".

We do all need to understand the detail behind these points, and the review usefully does that for us.  Why do we need to understand?  Because, as many a green will say, we have become utterly addicted to growth as the basic remedy for all ills: whatever's wrong, we expect eventually to grow our way past it, as we've become accustomed to.  You don't need to be Malthus to find that in need of revisiting.  History doesn't move, Whiggishly, only in one direction, as the thousand-year hiatus in Europe after the fall of the Roman Empire shows us.  

Oh, and apparently Gordon has no time for the thesis that super-intelligent computers will just take off into the distance and leave us quite differently situated (though the reviewer thinks we ought to be a bit more open-minded on that).   Finally:

C.  Meritocracy Has Betrayed The Working Classes; a book-related interview

The third book is The Tyranny of Merit  by philosopher Michael Sandel.  I found it rather easier going than the two reviews and I reckon many will enjoy his insights on corrosive leftwing individualism

By championing an “age of merit” as the solution to the challenges of globalisation, inequality and deindustrialisation, the Democratic party and its European equivalents, Sandel argues, hung the western working-class and its values out to dry … “Tawney argued that equality of opportunity was at best a partial ideal. His alternative was not an oppressive equality of results. It was a broad, democratic ‘equality of condition’ that enables citizens of all walks of life to hold their heads up high and to consider themselves participants in a common venture. My book comes out of that tradition.” 

(So, incidentally, does the British Army.)

*   *   *   *   *

There you go, that's social-distancing Sunday fixed for you.


Friday 11 September 2020

Brexit mess, part 998

 And so it continues. 

The divorce of the UK from the EU is getting very messy. I am concerned the Brexiteers believed their own hype when they were saying things like easiest deal in history. 

The EU were always going to make this painful, to make sure no one else followed us out of the door. The issue for the UK being even when optimistic brexiteers like Michael Gove took over planning, they soon realised no-deal was an economic disaster in the making and the kind of economic self-harm no good government could ever sign up to. 

The EU know this too, which is why at the end of the day it was always going to be a very tough negotiation. 

The latest tactics, trying to unilaterally undo the withdrawal agreement in small parts, really is not cricket. The EU have spotted yet another chance to grandstand and make out how they are the injured party when in fact they are being equally, if not more, intransigent than the UK. 

Overall, what a mess. I never wanted a no deal brexit, together with Covid-19 it will be a economic bloodbath for the UK if this comes to pass in January. 

Boris needs to earn his corn here, in reality he can sign any deal with an 80-seat majority and as the leader of brexit if he says it is the right choice most Brexiteers will go along with him. But actually letting the country fall into a no-deal scenario will be the end of him and with it any right-wing Government at the next election. Instead, Remainer leader Starmer will be banging the drum for rejoin at that point.

An unending political mess awaits if Boris cannot lead. 

Wednesday 9 September 2020

Local Authorities - The Day of Reckoning

So now Bristol Energy has gone under, joining Nottingham Council's Robin Hood Energy in ignominious retreat from its untenable market position.  Easily foreseen.  Though the details are slightly different**, the basic principle remains the same.  There's no easy way to enter a complex market as amateurs, despite "good intentions", "social objectives", and the backing of a Local Authority's all-too-accessible balance sheet.  The supposed rationale for being able to "undercut the Big 6++" - that you won't need to pay dividends and can thereby "pass on the savings" - is inane.  (How would that help me set up a supermarket, for example?)

Bizarrely, Bristol Energy has been bought by another Local Authority set-up!  Together Energy, a very peculiar little Scottish outfit, somehow persuaded Warrington Council last year to buy a 50% stake for a ridiculously large sum, plus a loan.  It's not clear (and probably won't be) how good or bad a deal they got for taking over Bristol's customers + staff.  But the point remains: LA's have no business doing this stuff.

There's more LA fallout to come.  On the energy front,

(1) Together Energy - must be a candidate for failure down the road, when Warrington is no longer willing to bankroll the show

(2) Thurrock - we've discussed their immense punt on solar farms (using cheap, short-term borrowed money, Northern Rock-style) before (BTL here)

(3) a plethora of smaller LA punts on solar farms and other trendy green "investments", not all of which are as low-risk as the developers tell you

Plus of course the vast sums LAs have staked on property of all kinds, racking up substantial debt to do so.  (My own LA, Croydon, is one of the biggest; the Chief Executive is walking; and word on the street is that a Section 114 Notice is imminent.)

Also interesting is FCA-registered Abundance Investment Ltd: "makes it easy for you to invest in businesses and councils that are developing the green infrastructure of tomorrow — while generating fair returns for your money".  They'd like you to believe LAs are an ultra low-risk punt.  Let's see how that looks by Xmas, eh?



** Bristol aspired to make a (small) profit, stuck to organic growth, didn't have too much doctrinaire political interference, and has been "sold" together with staff.  Robin Hood was a "not-for-profit"; had a lot of leftist political interference;  grew via loss-leaders and white-label marketing via other lefty councils; and, ironically as a leftie enterprise, has made all its staff redundant.  Both were secretive, badly governed, and burned their way through tens of millions of loca l taxpayers' money - all too easily done, keeping the show on the road long after it should have been wound up. 

++ the appellation "Big 6" ceased to be relevant some while ago: the retail market is much more complex these days.

Monday 7 September 2020

Yes, "Chairman Xi" Has Blown It

A month ago we mused on the idea of (as one BTL commenter put it) Peak China having come and gone.  Here's a good piece on the same theme by Simon Tisdall in the Graun.

‘Chairman Xi’ seeks only to purge and subjugate.  That is his weakness ... Chinese history is full of examples of omnipotent rulers whose unchecked behaviour led to disaster ... Xi seems to think he can do no wrong.  As a result, not much is going right.   Xi’s authoritarian, expansionist policies, pursued with increasing vehemence since he became communist party chief and president in 2012-13, have enveloped China in a ring of fire.  Its borderlands are ablaze with conflict and confrontation from Inner Mongolia, Xinjiang, Tibet and the Himalayas in the north and west to Hong Kong, the South China Sea and Taiwan to the east.  More than at any time since Mao’s 1949 revolution, China is also at odds with the wider world ... perhaps Xi does what he does simply because he can – because he’s lost sight of the national interest and ideas of justice and equality, and covets a personal legacy as the great unifier of the new China.  There’s nobody to stop him, nobody to say “no”.  It’s the blindness and hubris that comes with absolute power.  It usually ends in tears.

Of course, as Tisdall says, there are many angry words from the rest of the world whenever Xi throws down the guantlet, but nobody ever picks it up.  Still, they may not be so quick pick up invitations to the Belt & Road party, either. 

So for now, maybe it'll just be words.  And mockery ...  he loves being mocked.


Saturday 5 September 2020

Saddam's Sortie (Pt 3): Iraqi Military Innovations

In 1990 the determination of the USA - and the UK as its sidekick - to evict Saddam Hussein from Kuwait by force if necessary, necessitated a rapid learning curve for those of us on the staff, to get to grips with the large, potent and battle-hardened Iraqi army.  Which we'd never even given a passing glance to, being 99% focussed on Russia.  

Iraq, it turned out, was indeed influenced by Soviet military doctrine - its weapons being largely supplied from Russia at that time - but mostly at the tactical level.  When the shooting started (in early 1991), this turned out to be handy: but we're getting ahead of ourselves: thirty years ago today, we were at the start of a sustained period of planning and buildup.  The really interesting stuff was what we were learning about how, over the long years of intensive fighting against the significantly greater numbers of the Iranian army, they'd innovated militarily - not necessarily something that (in our arrogance) we'd have given them credit for.  In this post I'm going to recount one of these innovations - and there will be a couple more novelties to describe next weekend.

Advanced students of world military history may tell me there's a precedent for what I'm relating here; but I'm only aware of a rather limited forerunner.  The Iraqi army operated on the concept of specialist generals for different phases of a battle.  So: if there was to be a major offensive, typically there would be an initial preparatory logistical phase; then the assault; then (if all went more or less to plan) the follow-through/consolidation on the objective; and the preparation to receive, and deal with, a counter-attack.  Etc.

The Iraqis had formed the view that it might take a different man to lead each phase.  It's actually quite logical: why would planning expert General al-Logistics be as good at directing the assault as General bin-Bloodandguts?  So that's how they organised their affairs.

This strikes the 'western' military mind as very odd - mainly, of course, our conservatism coming through, reflecting the approach we were accustomed to since time immemorial, of having a single supremo commander on every front.  How, otherwise, is the handover managed between the sequence of generals involved?  What if things aren't going precisely to plan? (vide, almost every battle in recorded history).  Who can delineate distinct phases with such precision? - or rather, what do you lose by way of continuity and effectiveness if you do deliberately divide operations up in that modular way?  Had they never heard of the drawbacks of 'silo' thinking, nor the benefits of 'fusion', and seamless, integrated operations? 

(It also occurred to me:  given Saddam's lethal intolerance towards failure ... how did they come up with this doctrine?  Trial and error?  Who survived the errors to impement the lessons?

In favour of this approach, well, they'd had a lot more recent experience of fighting full-scale pitched battles than any army on earth - latterly against a numerically superior army spearheaded by human-wave tactics from the fanatical Iranian Revolutionary Guard.  And it seemed to work for them.

Precedent?  The Athenians in Thucydides' time seemed sometimes to pick and choose a handful of generals at a time (sometimes even on a democatic basis) for their major, set-piece annual campaigns against the Spartan alliance during the Peloponnesian War, and they seemed to divide up the duties between them according to what they were known to be good at.  But not always; and it didn't seem to be a positive doctrine, just an outworking of the rather 'open' way they conducted all their affairs.  Anyone know of a more compelling precedent?  

Next time:  more Iraqi innovations, including one that's truly bizarre (not to say gruesome ...)


Friday 4 September 2020

Apple bigger than the FTSE100

That is quite some going for the old fruit farmers. 

Apple of course is hugely successful company, able to sell its over-priced wares all over the world to willing consumers such as myself. 

But bigger than the FTSE100, Apple bigger than say HSBC, BP, Tesco and Unilever put together?

Of course there are reasons here, the US markets are on a roll but the nexus of investment in just a few stocks is a new phenomenon. In past decades the US system would have moved to break-up monopolists like Google or Microsoft, certainly Facebook and Amazon would not survive a real Anti-Trust investigation.

However with an Election year, Republican President and worries about US pre-eminence no such action is forthcoming. 

So instead 70% of US Equity value sits in literally a handful of companies. All I know is that this is unsustainable and not a reflection of value in the real world....but the markets can remain wrong for a long time before reality bites. 

Perhaps it really is different this time?


Tuesday 1 September 2020

Nuclear Power in the UK: Scary Scenario Looms

At the end of last month, EDF called time on the Hunterston nuke in Scotland.  It's been plagued with cracks in the graphite core, and not generating properly for quite a while now.  They'd been hoping to nurse a few more years output from it.

Now obviously, if the UK power system has been managing without it for all that time, it isn't needed per se.  BUT - it's the same design as all the other currently-operation UK nukes, except for Sizewell B.  A grim example of "concentration risk" ...  Could we get by OK without any of them?  They are all being nursed along, with successive extensions having been announced to their lifespans over the years.  

EDF, of course, has every incentive to squeeze the last drop from them, and not just for the electricity sales-revenues.  Decommissioning is very expensive, and as I wrote in an earlier story, relating to the North Sea oil & gas sector: 
... abandoning North Sea platforms comes at a huge capital cost: so every day’s delay in recognising the inevitable is money in the bank. And every small thing that can be done to eke out its life is an effort well spent.
The range of options for a nuclear operator is not as great as for an oil company (safety considerations):  EDF doesn't have available to it any real parallels to the strategy adopted in the North Sea case I related there.   

Furthermore, EDF is not exactly flush with money ..!  -  if it's bad for them in the UK, their French decommissioning liabilities are astronomical, as we've been noting periodically since this blog first began.  There's a rather obvious scenario where this could get extremely awkward.