Thursday 28 October 2021

Too depressing to write about the Budget really

 One of the worst budgets in living memory for me, worse than some of the humdingers during 2008/9.

A Tory Chancellor raising taxes painfully in the face of fast growing inflation, splurging money on the NHS and everything else that the left loves. No attempts at any market reforms to try and make the spending more effective. Just full on into the law of diminishing returns. 

Cutting funding for Defence, even as China threatens Taiwan and the world with hypersonic missiles and the French look to start a new 'scallop' war.

Net Zero and green taxes unquestioned and going up. Not long now until only the rich can fly, airlines will clock on soon to doing away with economy class altogether. 

The press reaction is even worse, pravda-levels of happy compliance because money is being created to be spent on 'good stuff.'

Nothing conservative in it at all. A horrid throwback to Brownian labour budgets. 

And they say they want this guy as Prime Minister?!

Well, the welcome it has now will not last out the spring, with inflation rising and incomes falling the Tories will end up well behind in the polls and deservedly so. If we are to have Labour budgets, may as well have a Labour government whilst the Tories can go back to school to remember what they are supposed to stand for. 

Monday 25 October 2021

Hardman Rishi - does he have the grit for the job?

It is budget week in the UK and Rishi Sunak can hardly be described as a hardman or dictator. But the challenges facing the UK now are very hard to answer by democratic political targeting. No amount of money can fix the NHS, the concept is not right for modern medicinal costs. The hardest up in society will always want more, the cost of fixing the economy to net zero is incredible. Minor tax rises wont be the answer. 

If Government could look to the long-term there maybe a way forward that involve some very hard choices and some real ones - guns or butter - nuclear power stations or nuclear missiles? The lights going out or more tax breaks for relatively less polluting gas. These don't seem insurmountable even in a democracy, but the way that say Singapore or Dubai are able to take steps forward seems much clearer to making hard choices - there is a ruler and that it that, no pesky polls or the Guardian to assuage. 

Within the ruling Conservative party what is clearly missing now is any political guidance, we are left with post-Blair focus group leadership - what is right is what is popular. The media have undue influence, but worse, the policies of today can be changed tomorrow. Even worse still, the policies of today make no sense for tomorrow but have the votes and popularity today. It is a rum state of affairs, literally. 

Things therefore are a very bad short-term mess and the Chancellor has a dud hand to play with. All the more reason to start taking some serious long-term positions. Look how well George Osbourne did with his 'long-term economic plan', such that it was. When all around are driven mad, some clear sightedness will come in handy - which is why Rishi has to grab the chance that Boris is not capable of and make some hard nosed decisions this week. I am hoping they will be of a capitalist bent and not socialist dreaming.

Friday 22 October 2021

When Do The Bread Riots Start?

A more than usually speculative post ...

Last week, the price of petrol went up noticeably (~3%), but for me even more significant were increases in the prices of milk at Tesco (5.5%), and - highly symbolic - the brown bread we favour (12.5%). 

Historically, British bread riots were when the price of a loaf went up from, like, 4d to 5d.  So we're halfway to that kind of increase.  In France, received wisdom is that Les Gilets Jaunes kicked off as fuel-price rioters.  There's nothing I can see that will do anything to reverse the current inflationary trend - in fact, quite the opposite.

When does modern British man/woman hit the streets over the cost-of-living?  And - will it be before or after the 'personal' costs of Net Zero Carbon hit home in a really visible way?

I put it that way because this week saw the launch of the fat government document purporting to be its Net Zero Strategy (alongside a distinctly, nay frostily skeptical Treasury document on the same theme).  Ordinarily, as part of our service to readers I undertake to review these things systematically; but this time there's no point.  The main strategy doc is so full of numerical nonsense and indeed internally contradictory numbers, it's an outright embarrassment - are there any Civil Servants left with an ounce of pride? - and can only be taken as something for Boris to wave at COP26.  (He'd have done better to stay with the highly complimentary assessment of the UK in a review from "Climate Transparency"  [one of those proliferating green NGOs] which has us as by far the best performer of the G20 nations - out on our own in a category of one.)  However, one thing is really clear: big costs are on their way.

In one very obvious scenario, COP26 could be a PR disaster.  It took a lot of effort to prevent the same outcome at Paris '21, when host-nation France was putting in 120% diplomatic effort and had a lot of other big nations onside anyway.  Doesn't look particularly auspicious for Boris right now, although Kerry, the EC (if not all euro-nations) and the UN apparatus will be more than a little helpful to his cause.  Crazy promises of cash might be forthcoming to work the trick.  On the other hand, stay-away Xi might put in a dramatic appearance and engineer himself into the position of being 100% pivotal: "either acknowledge me as the saviour of the world, or I pull the plug".  Who could be surprised if COP26 ends in fiasco, with the 'developing' nations stomping out due to their pockets not being adequately lined with gold; then Xi summons the developing world leaders to Beijing for an early Xmas present?

Anyhow, unless Boris engineers a half-triumph for himself, I reckon he's gone before Easter.  Then Rishi can announce the resumption of fracking, etc etc ...  Oh, and deal with those bread riots.  What a good job there's currently no Leader of the Opposition.

Have a great weekend!


Wednesday 20 October 2021

Evergrande: What Happens Now?

For all their clever CCP-directed, "with-Chinese-characteristics" tweaks to classic western capitalism, somehow they couldn't avoid, errrr, a property bubble.  How demeaning for a communist country!  How ironic.

And how we'd all laugh, were it not for the plethora of predictions that the demise of Evergrande will send out shockwaves across the globe, at a time when we're all a bit fragile.

Really?  Well, perhaps.  I'm no authority on this kind of thing: and in my own sphere I already told you in February that gas prices in the far east were the start of serious energy-price inflation.  But my gut feeling is that if the west could ride the banking crisis of 2007-09, the CCP can engineer a soft landing for Evergrande.  The underlying issue, to my mind, is the impact it has on Chinese politics, both inward- and outward-looking.

On internal politics, I presume a serious property bubble - with the attendant political shame this represents for communists, as alluded to above - strengthens the hands of the socio-economic puritans of the CCP, led by this chap, Wang Huning, (whom I only became aware of recently).  2021 has already seen a striking social-media purge of individualistic content (and social media stars!) that follows hard on the humbling of tall poppies Jack Ma & co.  All this goes by the benign-sounding slogan of "Common Prosperity", but extends to a "clamp-down" on private tutoring (FFS), which must have a major impact down the road.  Does the middle-class man in the street care about Jack Ma?  Not really, I guess.  But his kid's education & perceived life-chances ..?

Then there's the long-awaited Chinese digital currency.  I have absolutely no idea how Evergrande impacts that project - does anyone here? - but it probably does.  Given that it's designed to strip the USD of its strategic role in world finance, it's kinda important for the long run.

It's the "physical" externals, though, that should surely trouble us most directly.  Last year we debated the possibility of "Peak China" having already passed.  The decades of extraordinary Chinese softly-softly patience and (rather successful) attempts to build a kind of soft power to rival that of the USA seem to have come to an end with Xi's assaults, physical and otherwise, on HK, India, the South China Sea etc etc etc.  These suggest that either (a) he doesn't care anymore about staying with the soft stuff; or (b) things weren't moving as fast as he wants.

And what's that?  Taiwan, of course - and in his time in the top slot.  By hook or by full-scale attack.

Old Man in a Hurry can be a comical phenomenon; but it can also be dangerous.  Very dangerous.  We have our own in the shape of Biden.  There's an awful lot that can go wrong here.  I've long suggested that Soviet caution in not invading western Europe when it was at its peak state of military advantage, speaks well for Politburo political maturity at that time.  But equally, they weren't in any kind of hurry - hey, they were real Marxist-Leninists; they thought it was going to fall in their laps eventually anyhow. 

But Xi, like Mao before him, is (mainly) a nationalist.  Evergrande?  Pff - a sideshow.  IMHO.



Saturday 16 October 2021

How the Woke Thing Cripples the Left

Some enlightening weekend reading.  We non-lefties are most just annoyed by the woke nonsense, but for the 'honest, traditional' egalitarian Left, it's crippling.  Some extracts here from a great essay that deserves to be read in full (my emphasis, towards the end): 

Here’s a fun tip for you all: if you have the power to get someone fired or otherwise ruin their life you are not a powerless, marginalized Other … a bizarre liberal discursive culture where, if you dress up what you’re doing in vague language about oppression, you can operate however you’d like without rebuke and attempt to ruin the life of whoever you please … 

The left-of-center is in a profoundly strange and deeply unhealthy place. In the span of a decade or less a bizarre form of linguistically-radical but substantively-conservative identity neoliberalism descended from decaying humanities departments in elite universities and infected social media ... through which it conquered the media and entertainment industries, the nonprofit industrial complex, and government entities as wide-ranging as the U.S. Department of Education's Office for Civil Rights and the brass of the Pentagon. That movement now effectively controls the idea-and-story generating power of our society, outside of explicitly conservative media which exists in a large silo but a silo all the same. On any given day the most powerful institutions in the world go to great lengths to mollify the social justice movement, to demonstrate fealty, to avoid its wrath. It’s common now for liberals to deny the influence and power of social justice politics, for inscrutable reasons, but if the current level of control over how people talk publicly is insufficient, I can’t imagine what would placate them… 

because the social justice movement’s first dictate is to establish a hierarchy of suffering, and to tell those that are purported to suffer less that their problems aren’t problems, no such mass movement is coming. The social justice movement is not just incidentally antagonistic to organizing everyone and recognizing all kinds of people as worthy of our compassion and support. That antagonism is existential. When you ask many people within the movement, “what could we do to convert the white working class to our values?,” they will simply tell you that they don’t want to convert them, that they are not worthy of being a part of their movement. They would rather have targets than converts, to lose as an exclusive moral caste than win as a grubby populist coalition. 

Core to understanding this moment is to realize that the vast majority of people who enforce these politics don’t actually believe in them. They don’t, that is, think that social justice politics as currently composed are healthy or just or likely to result in tangible positive change. There’s a core of true-believers who do, and there’s a group of those who profit directly from the hegemony of social justice politics in elite spaces… There’s conservative critics, who are both the most natural targets of social justice ire and yet those the social justice movement seem least interested in targeting. There’s an island of misfit toys of left and leftish critics of social justice politics like me. 

And then there’s the great big mass of people who are just scared … Why wade in those waters when the potential consequences are so severe, and when the upside is so limited? … no one feels empowered to speak truth to bullshit.


Thursday 14 October 2021

Stagflation - umm, how?

All the comment in the media around the world today is of the coming stagflationary scenario and a return to the 1970's. 

Even at a high level I just don't get it - this is another case of journalists and commentators latching onto something they don't understand and cant be bothered to apply in a few minutes thinking into. 

The key here is the stag piece - inflation is a given as we have a global energy crisis. Longer term this seems to be really quite well under-pinned by a lack of investment in real energy and an over-reliance on renewables fairy stories far ahead of the real supply curve needed. 

This will make Putin and MBS very happy for a long-time to come, even Venezuela might be able to pay some of it bonds and Iraq bribe its way out of civil war. 

Anyhow, the first part of stagflation is a slowing economy. This feels like a very unlikely outcome of a huge bounce back from a lockdown of the world economy due to the pandemic. The idea that there won't be growth does not chime with activity in the UK now, where people are busily spending their enforced savings wherever they can. Town centres are heaving, leisure and retail surging. 

The only thing that would kill this off is a massive stock market crash that hammered sentiment. This is a hard thing to engineer when interest rates are zero-bound and the Fed prints money liberally to feed the system. Admittedly, there will come a time in the next few months when interest rates will have to rise or QE can be cancelled (a longer post on this is overdue) to reduce the impact of inflation. However, real inflation caused by energy price hikes wont really be impacted by higher interest rates - it is not financial inflation after all, but input prices. Lower currency will be a negative too in this scenario. 

However some reckless governments will see this as the easy way out of 150% GDP borrowing, with a few years of high inflation stopping all that painful austerity which instead can be meted out democratically to everybody and blamed on markets and foreigners rather than Government policies. 

So, anyone saying we will see stagflation must really be saying they see a huge market crash coming as the precursor - yet few seem to mention this.

Tuesday 12 October 2021

The Tory Insurgents March On!

"the push for a mayoral putsch, which has aroused passions amongst those in favour but barely any other reaction at all, seems quite exciting and, well, insurgent. I can easily see it succeeding: probably a low turnout with 80% in favour of a mayor, or something bizarre like that."

Well, that was my prediction ten days ago for the Croydon Mayoral referendum, and lo!   

  • Turnout: 21%
  • In favour: 80.4%
Every single ward voted in favour of switching to the elected-mayoral system, which gives the Left pause for thought: they thought their client minorities (who are in fact the majority in the north of the borough) could be persuaded otherwise.  Now the serious politicking starts, in particular within the People's Party, which having inevitably campaigned for the status quo (hence the original blog post) now have to scramble together a position for May's election.  They are posting tweets asking for forgiveness for things they said in the anti campaign (e.g. it was white middle-class men who wanted to switch to the mayoral system).  I won't bore you with the Toytown minutiae, but there are several amusing aspects:

  • the Croydon North MP Steve Reed (Lab) was prominent in the anti-campaign: but he's Starmer's Shadow SoS for Communities and Local Government and his official policy for the nation as a whole is, ahem, pro elected mayors!
  • he and the rest of his crew campaigned on the slogan "No Fat-Cat Mayor".  The lefties are now attacking, errr, themselves - for "fattist sloganeering" (sic) (!)  You couldn't make it up, and indeed I haven't.
  • the famous local turncoat Andrew Pelling, once Tory MP for Croydon Central, deprived of the whip over allegations of wife beating, whereupon he switched first to run again (unsuccessfully) as an Independent, then as Labour (for whom he now holds a Council seat) ... having campaigned for the anti-mayor cause, now proclaims that this was only because the nasty folks in his new-chosen Party twisted his arm, and of course he's really very keen on elected mayors, particularly ones whose first name is Andrew and second name is Pelling.
And people wonder why Labour languishes in the polls, even in today's dire circumstances.  Well actually, no, they don't.


Monday 11 October 2021

The great energy awakening

I saw a SUN leader today which urged the government to cut the excessive green taxes that we face in the near future, apparently as Italy and Spain are already doing. 

At last perhaps, after many years of eco-loons parading their virtues for all to see, there maybe the slow realisation that the fantasies of the greenies have no bearing on reality. China, whence our Xmas presents are to be made, is currently suffering from extreme power shortages with factories closed. This will at least give a chance to catch-up on supply chain issues, but is both unlikely to reduce prices as scarcity increases and also, umm, involves them lobbing another few billion tons of coal into their power system. 

As such, our efforts of our own pale into insignificance. And the ultimate victim must come in the form of "Net Zero 2050."

This plan, indeed law thanks to a virtue signalling parliament, has no basis in reality whatsoever, the technologies to make it happen do not exist nor the political will to build the nuclear baseload we would need.

But the biggest piece in buy-in, to change peoples' lives so radically you would need their support. Yes lots of people emote about green issues but as we know, most still drive diesel cars. They expect someone else to do something. In this case, it will start to impact everyone from now on, which I personally think is a huge vote loser and so will come upon more stringent scrutiny in the future. 

Friday 8 October 2021

American Corporate Culture

The energy crisis is so shocking, let's try to raise a smile instead for the weekend.  As always, I turned this morning to Dilbert  - Scott Adams' worldview is refreshingly unusual, and it frequently turns into excellent humour - to find in the opening frame, the Boss asking:  If anyone has an objection to my plan, this is the time to voice it.

Well, you can find out how it ends here.

My own personal encounter with this cheery manifestation of American business culture was as follows.  Our London office, staffed mostly by Brits, was in receipt of a dynamic new American CEO, who immediately instituted some far-reaching changes.  He duly held a 'Town Hall Meeting', at the end of which he asked for questions: "- any questions at all".  

Accustomed to the British style in which this invitation was to be taken literally, up spoke Bob, a middle-ranking manager, with a courteous but penetrating question that was absolutely on point in the circumstances.  He got an answer.

When the executive team next assembled, the CEO said to us:  Now obviously everyone assumes Bob is going to get fired now, but you can tell your troops, I'm going to overlook it this time: he's OK.

The Brits amongst us glanced around at each other, somewhat stunned.  None of us had assumed anything of the sort ...    Yep, in the Land of the Free, some elements of the freedom package are selectively applied.

I'm sure there are several other unnerving stories out there, so go for it.  Did I say "smile for the weekend"?


Wednesday 6 October 2021

Energy crisis continues - where is the clamour?

If anything, I am amazed at how little the energy crisis is hitting home. Gas prices are 200% up and this means that we will shortly be paying well over 100% increases on our domestic bills. So much for keeping a lid on inflation, this alone will drive inflation to over 2% per annum without any other factors. 

It still seems to be just a business news page issue, the petrol shortage, although energy for transport is seen as something different. To be blamed on Brexit or the pandemic as per your choice. 

The energy crisis has none of these factors. The Government is 100% squarely to blame over the last 10 years. Cutting gas and oil stations too quickly, not replacing nuclear and then over-relying on Wind and Solar when they are not fit for core supply with the current lack of battery capacity. This is before we get to Nick's post of the lack of gas storage. The whole of Europe is suffering the same issues. 

How these costs work themselves out will be both interesting and horrifying. Costs and prices will go up as input costs are hugely increased - no both wages and energy. Countries, cough America, with domestic supply will have a huge advantage for the next few months. China is struggling, rationing power all over the place where it can. 

Why the media and opposition can't see what a hole the Government is in over this and one which for which there are simply no short term answers.

Monday 4 October 2021

Can the Tories recover their sanity?

 Today is the start of the Tory party conference. Whilst ahead in the polls against the mad left of the Labor party, they reality is this feels alot like 1995/6 to me. Back then, John Major's Government had lost its way, focusing on some bizarre things like the Cones hotline. Their credibility was shredded by the ERM debacle and never recovered. Blair breezed to a landslide in 1997. 

Today the Tories are lost, Boris is raising taxes to pay for the pandemic, they seem to think that wage rises are the way to improve the economy and that Brexit related shortages are not their fault. The thing is, most of them are and for now the public, unhappily, are ready to accept the Covid excuses, that won't last much longer in the face or incompetence. 

Also, the lack of ability to nail some poor behaviours is not helping. Take the DVLA, as we noted here they managed to be on strike and on furlough for long periods last year. Refusing to work at the Unions behest. Now we find ourselves lacking in qualified HGV drivers, the lack of new ones can be squarely blamed on DVLA unions officiousness - if only anyone from the Government could put two and two together. Instead, despite lacking drivers, the Government is against allowing in foreign drivers at a time of desperate economic need. This makes no sense whatsoever, there is no upside to this decision. Get the drivers now and plan for the long-term - don't plan for the long-term during the short-term crisis. 

Wage rises are another example of muddled thinking. Of course, over-supply of labour pushed wages down and effectively, along with China imports, caused the deflation which has left us with record low interest rates for over a decade. Closing off both these taps at the same time is going to be inflationary - what good will that do if rising wages are inflated away? There needs to be productivity improvements to match the rise in wages for sustainable growth - automation and digitalisation are the key drivers here which should see taxes cut for business investment.

The pronouncements of Tory ministers are very far from any complex understanding of the situation they find themselves in and Boris famously has no ideology but instead divines the populist will of the moment. This means despite lots of talk about long-term there is no George Osborne sense of actually meaning it or doing much to deliver it. 

My personal view is the Tories are at the edge, reliant on Labour being so abysmal to allow them to continue, but it wont be long before this is overcome if they continue with the manifold misteps of late. 

Saturday 2 October 2021

Insurgency in British Politics

A while ago in Parliament, when Corbyn was still leader, he accused Boris of being a "phoney outsider" - an odd, Westminster-bubble insult as we noted at the time.  Goes to show, though, how much of an advantage being an insurgent is nowadays deemed to be.   Corbs, of course, had been told that being a genuine outsider was his USP, and he wanted to see off any pretenders to this crown.

This was brought to mind as I found myself pondering how to vote in next week's local referendum on whether Croydon should switch from the Leader/Cabinet system of local government to the Elected Mayor variant instead.  (Sadly, the old Committee System is no longer on offer.)

How does this referendum arise?  Well, enough people signed a petition: but why?

Because the local Conservatives, who always used to hold the borough council (and, at one time, all 4 parliamentary seats, as we had in them days**).  But demographics have worked against us and it's been Labour for nearly 8 years (and they also have two out of three MPs now).  But the popular vote is still majority Conservative across the borough as a whole, the ward boundary arrangements not favouring us at all.  So the Elected Mayor wheeze is designed to keep Labour out of power, because they may still command a majority of council seats after the next elections in 2022.    

Given that in their 8 years of control Labour have literally bankrupted the town with their self-aggrandising Toytown politics, you might might think that's a bit pessimistic about the good sense of the Croydon electorate; and maybe it is - though fewer people seem to care about the bankruptcy, the blatant corruption++ and even the squalor of the council properties than you'd imagine.

But equally there's huge, sluggish apathy in all directions.  So the push for a mayoral putsch, which has aroused passions amongst those in favour but barely any other reaction at all, seems quite exciting and, well, insurgent.  I can easily see it succeeding: probably a low turnout with 80% in favour of a mayor, or something bizarre like that.

This is what the left hates about the Tories: endless flexibility when it comes to policies & ways & means.   They hate Boris, too, but seem unable to do anything about him.  They wish they were the populist revolutionaries but in many senses the permanent revolution is on the right.  

More Croydon Referendum news in due course.



** To be fair, it was a bit aberrational: Croydon Central has been a genuine marginal for 60 years, and the two northern constituencies were natural Labour territory, more akin to neighbouring Lambeth and Lewisham.  But they were held by strong Tory personalities: a much loved local worthy (a hanger-and-flogger); and the saintly Bernard Weatherill (who, as an old India hand, could converse with his electorate in their own tongues).  It was never going to last - and it didn't.

++ Space doesn't permit me to recount the stories, but the redoubtable Inside Croydon is chock full of them, as is Private Eye.