Friday Chat; Is the UK a Democracy?

I see at Iain's much speculation that Broon will go for an October election. This would seem to hamstring the Tories in the middle of a policy review, get the Lib Dims whilst they still have a poor leader, exploit the Broon bounce and allow an election to replace a referendum on Europe.

All in all, it would be a very clever tactic by the Labour party, much as the money to sponsor it would put them in hock to the Unions for ever.

My take though; this is not very democratic or fair is it?

Manchester United don't say we will only play Arsenal on rainy Monday nights when their fans cant' get to Old Trafford, do they?

Having this system mean we are open to abuse by the ruling party, which probably explains why we rarely change government and only do so when things are a disaster. I think Broon knows that soon the economy will be in trouble and the sooner he goes the better he does.

This is not democracy, with the will of the people being paramount. It is the scheming of those in power to keep it, always having the upper hand over the opposition.

I think fixed term limits are seriously needed to rebalance the system. (Along with a federal republic and a fully elected second house, but these are for another day).

Discuss.

BAA; More trouble ahead.

I have mentioned BAA recently, along with British Airways, as companies in difficult straits. The BBC reports today that BAA is now to shed 2000 odd staff.

It is well known in the industry that BAA has much corporate fat to lose. They have a large M&A department for example that won't be needed now they are owned by the Spanish. They also suffer from a highly unionised force which has kept them from reaping the benefits of technology by downsizing the staff.

However, the real cause of the problem is that with the Credit market turmoil they have been unable to re-finance their loans. The Spanish company bought BAA with a huge chunk of debt at high rates, that they would look to re-arrange after the deal completed. Now they can't do that they need to seek other ways to raise money to pay the debt and try and make a profit.

At this rate the management will be praying for a break up of the monopoly of South East UK Airports, as the only way to realise cash from the business in the next few years!

Resilience

A very reasonable preoccupation around this and other commentaries is whether the global financial system is robust enough to absorb the forthcoming ‘correction’ without catastrophe. I particularly enjoy Bearwatch (Sackerson) and Angels in Marble (Hatfield Girl) [and a commendation is due for Discursive Monologue too - CU]

The seriousness of the present situation, and the potential for screw-ups by governments and financial authorities, are not in doubt. Ditto the scope for individual financial disasters.

But the overall resilience of the system may be greater than some fear. There is a huge amount of private-sector brainpower able to switch into restructuring mode with lightning rapidity – far quicker than any regulator or finance minister can react – as was demonstrated by the Far East crisis of the late 1990’s, for example. The profit motive has a way of sorting these things out: and the speed of modern communications ensures that price signals are transmitted widely and quickly. Almost any big shift represents an arbitrage opportunity for someone.

The disposition of wealth before and after a big shock is different, for sure. And, as airily as we may dismiss the Asian financial crisis a decade on, it needs to be recalled soberly that some Indonesian tribes reverted to cannibalism, so extreme was the resulting poverty for a while.

We may not need to wait long to find out whether I am right. In the meantime, on a personal level, as Sackerson has recently commented, diversification is the key.

My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year (Merchant of Venice)

(Or invest in guns ’n gold, of course, if the Hitch is your preferred sage ...)

ND

Time to start Saving?

According to Post Office Research out today the UK's savings ratio is only 2.1%.

As we would expect a wide variety of news organisations are covering the story. They are generally making nice headlines like 'Briton's save less today than 150 years ago.'

This one bemoans the choices people make and the BBC story makes it sound like people are being feckless in today's modern world.

Yet there are some very good reasons at the moment for a low savings rate;

1 - With relatively low inflation the banks offer paltry returns on money put away, in fact in a normal bank savings account it is not unusual to find that the return after inflation and tax is a negative. People are not stupid and have not piled into this.
2- With house prices rampant many people today have invested instead in mortgage repayments each month. Anyone who has done this in the past ten years will have seen an approximately 3 fold return on their money.
3- The Nanny state now looks after us more than ever. Need medical assistance? free. Need education for your children? Free. Need housing urgently? Free. In the past we did not have such a wide safety net as we do today. Thus a big incentive to save has disappeared.
4 - Also with a reduction in the number of final salary pension schemes due to Government mismanagement, there is less reward for saving for retirement than there was just a few years ago. So unsurprisingly people are saving less for retirement than they used to, as the returns available have gone down.
5- ISA's are the government's choice for encouraging investment. They heavily plug using them to buy shares and funds; not really a good choice in the last few months with the market down 10% recently. I would be surprised to see many shares ISA's being created today.

So whilst all the Mainstream media make this sound like a tale of woe, it is nothing of the sort. instead people are making the right decisions for the environment we live in. As inflation goes up further and house prices decrease, traditional savings will come back.

Which after all is just what the post Office wants, hence commissioning the research!

Poll Results: bank Holiday Depression

My poll of last week was an attempt to find out what was the consensus on the fall out from the Credit crunch that has occurred over the Summer months. I set the poll up with only negative results to see just how pessimistic we could all be. I was not surprised to see that over 50% thought that a serious global recession is likely, with a quarter even voting for a depression.

Overall nice thoughts for what is a public holiday here in the UK (and a rare sunny day to boot!)

I voted for a recession only in the US, which is I think what will happen for now, with a slowdown in Europe, but not a recession (well not in the UK at any rate, maybe Italy and the Southern European economies are more at risk).

Will the credit crunch spark a Worldwide Recession?

Only in the US	2 (16%)
Only in the West	2 (16%)
Everywhere	5 (41%)
Depression is more like it.....	3 (25%)

Sunday Business Round Up - End of the Silly Season

With the August Bank Holiday weekend here, it is traditionally the last week of holidays and many people will be back at work next week, albeit for only 4 days.

Usually in the Summer months things are very quiet in the business world and firms focus on issues such as budgeting and planning for the year rather than sales pushes or merger and acquisition activity.

However, that has certainly not been the case this year, with remarkable volatility in the Stock markets and the Sovereign funds looking at buying many top companies, even as Private Equity struggles.

The business media have been kept busy and must now look forward to the next two months, when the business pages will likely be of growing political importance too as we wait to see what happens in the aftermath of the credit crunch:

Credit crunch worse - ...for commercial property than even residential in the UK market.

Norwich to sell-up - as above, the first large move in the commercial property market.

Northern Rock - Worst hit UK bank? Maybe time to review any relationships with them if things get ugly.

Will the Federal Reserve response work? - A nicely written article here in the Guardian.

Hedge funds not looking so clever - But will a bad summer make for a bad year?

LSE to get stake taken by Sovereign fund - As blogged before, mote of this to come.

Irwin Stelzer on Sovereign funds - I rarely ever agree with this guy, but still makes some interesting points on Sovereign funds.

DoT plays tough with Virgin Trains - never mind the passengers and tax payers, eh boys?

BA Legal trouble - Class action suits set to cost it more.

Lead paint - still more recalls expected in Toyworld.

Friday news; Alistair Darling speaks

...in late news today the Chancellor of the Exchequer has commented on the current state of the markets and the UK's economic prospects;

"Despite the moves in the financial markets of late the Country's economy continues to grow at 3%. I have some good news and bad news about the record investment the government is planning in school and hospitals. The good news is, we have enough money to pay for this building program. The bad news is, it's still out there in your pockets."

dum dum ching!

Back to the 70's; The revival of the Unions?

In the decade of my birth, we had a torrid economic time. The UK and the West in general were suffering from a huge increase in oil prices, inflation was strong and hard to keep under control. With a slow down in the markets it led to stagflation too - high interest rates, high unemployment, high inflation and low growth.

Today we are starting to see many of the same things impinging on the economy. The last and most crucial aspect of the 70's though was the impact in the UK of the Unions. They held the government to ransom and destroyed much of our manufacturing industry (despite the socialist re-write of history that would have you believe the opposite).

Fast forward to 2007 and the unions remain under control; but with Gordon Brown in hock to them to pay for any upcoming election, they are slowly rebuilding. Today in London a two 3 day strikes have been announced for a couple of weeks time.

What is the strike for?...concern over possible job losses due to Metronet going bust which was thanks to Red Ken's and Brown's machinations)

A real danger of Labour in power for the rest of the decade is the increase in power of the extremely left-wing Unions in the country. I am all in favour of Unions overall, a fine way to balance worker right's against owners, but the likes of radical Bob Crow know nothing about economics or business and are in it for the power game alone. This serves the interests of no one.

PPS . . .

I seriously thought I’d flogged the philosophical horse thing to death, and you probably did too, but Ohhhhh No. Oh dear me, no.

Today’s Grauniad carries Tim Dowling’s spoof ‘permablog’, and what’s his theme? Yes, it’s all based around “this course in philosophy of floral design” and “a course in equine leisure management” . . .

And a hat-tip, do you suppose ? Just a little one ? Dream on, Drew

Ah well, at least you read it here first

ND

Time to leave after all?

I posted a poll a whole ago about whether it was time to leave the UK. The vast majority of you voted yes. Today I see that your thoughts are heavily backed by the latest ONS population figures.

385,000 people left for the long term in 2006. That is 0.7% of the population in a single year. In addition to this, 549,000 people migrated to the UK, or 1% of the 60.6 million population.

So if you look at the net change, 900,000 people were involved in major population movement, or 1.5%.

My hypothesis is that many of those leaving are white, retired or near retirement. Most of those arriving are from Africa or Eastern Europe.

The speed of this change is backed up by my experiences of living and working in London, where it is sometimes rare to meet a white native in a whole day. This brings up so many issues about cultural change and potential capital flight; yet I see no political commentary on it because it is 'red' issue. The left think migration is good becuase it means a net gain of poorer people in need of a nanny state, the right are scared to mention it in case they get accused of racism.

What do you all think? Am I getting my knickers in a twist over nothing?

Will taxes ever be cut in the UK?

As we edge close to the next recession (or Depression, depending on how much the financiers screw everything up), alarm bells are ringing in my head about the future that taxpayers face.

Public debt is at an admitted 36.4% of Government spending (let's not include all the PFI and State pensions we have not paid for, as Gordon wants us too).

The Public sector employs 5.8 million people, a near record, only beaten at the height of the last recession in 1992.

Our Chancellor thinks that money not in the government's hand is an utter waste.

Our Shadow Chancellor, George Osborne, thinks along these lines "I want to simplify taxation and move towards a lower, flatter tax system. In a mature economy like the UK, moving directly to a "pure" flat tax would not in practice be viable. That said, many of the features of flatter taxes, such as simplicity and stability, can and should be actively pursued." Not exactly shouting from the roof tops is it?

In a recession, a government following Broon and Badgerss beloved Keynesian economics, needs to spend its way out of trouble. Unfortunately, we don't have much wiggle room on the borrowing side, maybe 5% or 6%. That is only about £25-30 billion. Given government waste on expenditure too, that effect of that money will be considerably reduced.

So instead, tax rises might have to be considered to keep the Northern & Scottish Statist economies going. Yet we already employ 5.8 million public sector workers, all with fantastic pension (liabilities). So can we really increase this number and remain economically productive? It would seem unlikely. How many more Head's of Adult Services do we really need?

As for the Chancellor, not paying tax must be theft according to his new paradigmatic viewpoint. He won't stand in the way of his masters' redistributive wishes (i.e. from producers of cash to consumers of cash).

Finally, the Conservatives as quoted above, whilst making some noises about reform, really are not interested at all. They are far more concerned about getting the votes of public sector workers and the 7.95 million non-working people. This is politically a prudent strategy, as without the 14.85 million state and non-working people potentially voting for them they have very little chance of being elected.

For a taxpayer though it makes grim reading. I can't see any way in which taxes will come down in any meaningful way, despite their huge increases over the last few years.

Ouch, that hurts.

Horses for (Philosophy) Courses - a postscript

So shaken was I on Friday upon encountering Philosophy and Equine Studies (Northampton University), I failed in my duty to come up with the appropriate course-notes.

Fortunately, Mrs D has helped rectify this omission, observing that at least this strange degree puts Descartes before the horse . . .

Happily, too, it lends itself to the detailed study of Thomas Equinas.

However, it takes the great 18th century German thinkers at a Kanter.

Fetch some Straw,son

I shall have to get off this Hobbe-horse . . .

ND

Sunday Business Round Up - 19 August

Well Business was always going to get back to the news eventually after a few years of solid growth and good news; now come the harder times where we pay for the largess.

Given that no one has a clue what will happen over the next 6 weeks or so, the papers are sticking more to analysis and some doomy predictions to help the headline writers.

Big Chill Ahead - is the Telegraph take on the matter, fearing the losses in the City will affect the wider economy.

Nothing to fear -Also the Telegraph leads with comment saying that nothing is fundamentally wrong and all will be fine. Please note my post of yesterday below!

US rate cut likely - Says the Guardian. However I feel this would be a huge mistake you don't cope with a crisis caused by cheap lending by making lending even cheaper.

Even the UK can expect a rate cut - The normally Bullish times goes into a writing meltdown predicting all sorts of strange events. Worth a read because it reads like a conspiracy theory!

But sub-prime crisis is already here - A much better piece from the Times showing why the crisis in mortgages is here to stay.

BA to move on Open Skies - The airline, of terribly battered brand of late, is to try and use its muscle in Europe to spur growth it cannot get in the UK.

CBI disagree with Tory plans - The most sensible thing said by the Tories, to pull out of crazy EU regulations on working practices, is criticised by the CBI; what a strange place the country has become in the last decade.

Miner digs up huge Emerald - 10,000 carat, that is big!

Brits shop USA - but make the most of it as the £ won't stay at $2 for long!

EMAP still trying to break-itself up - The misfiring media group may yet save its reputation by a valuable break-up .

Don't listen to the cleverclogs; stay out of the markets!

Many thanks to ND for is excellent posts this last week with me being otherwise occupied. May they long continue. Although I have been rather busy, I did notice the rather large problems occurring in the stock markets of the world this week.

The most obvious points to remember are that many people in the markets are on holiday, so much of what is going on does not reflect true market sentiment., We have to wait for September to understand what is actually going to happen in the rest of the year. Secondly, until it is worked out who actually holds all this bad debt that has been issued on the back of dodgy US home loans, there will be rumour and change for some time to come.

So in short, the markets remain very volatile and prone to sharp falls on rumour alone.

This has not stopped those who should know better from encouraging people to get into the market; a little bit like recommending favourite cliffs to Lemmings.

Couldn't Make It Up (part 94)

Well, as the financial markets melt down it’s A-level time again and a young person’s fancy is directed toward ‘Uni’ as I suppose we must learn to call it. The government wants 50% of da yoof to gravitate in that direction.

Now the Drew read Philosophy and so automatically turns to the Phil section in the Grauniad’s long list of courses the ‘new universities’ can’t fill. And by Heaven there are some amazing courses on offer.

For the avoidance of doubt, not a single one of what follows was invented by my Guinness-fuelled imagination.

Phil with Digital Publishing (Hertfordshire) - this is perhaps what I’m doing at this very moment, I think I am in line for an honorary doctorate

Phil and Sport (Manchester Met) or, if a bit of ballast is required, Phil & Ethics & Sport (Liverpool Hope): or Phil & Sports Dev (St Mark & St John) – the connection is probably drugs …

Phil with Equine Studies (Northampton) – there is a joke just itching to be written here but I’m too numb to come up with it just now

Phil with Dance (Northampton again) - & perhaps dancing horses …?

Phil with Gender Studies (Hull) – guest lecturer J.Prescott ? Actually, this would be an absolute cracker: for starters – why hasn’t there been a single women philosopher in the whole history of the universe ? ooops, there goes the honorary doctorate

Phil & Media & Commercial Studies (Wolverhampton) – well I suppose the academically renowned Wolverhampton school of philosophers do need to promote themselves a bit more professionally

Phil & Popular History (Staffordshire) – thinking about it, there is definitely a gap for a ‘1066 And All That’ type of philosophy text, I might write it meself

Phil & Social Justice (Manchester Met) – the blood runs cold: please stick to the Sport, guys

Phil & HR Management (Northampton) – not content with dancing horses … I think we’ve all met HR types who’ve been on this course

And finally, before my sides split, Phil with …

with … with … Outdoor Adventure Studies ! (St Mark & St John again) . . . what is going on here ?

Altogether now

Im…..manuel Kant was a real pissant
Who was very rarely stable.

Heidegger, Heidegger was a boozy beggar
Who could think you under the table . . .

ND

Congrats to the Slickers !

Hooray - success at last

Another Slicker son tot add to the brood and Mrs. has made it too.

off to bed,

2 weeks paternity leave for blogging coming up.....

Here's what he thinks of us

"I think the important message to be sent is we have done everything in our power to maintain the stability of the British economy."

McBroon on the financial meltdown (exclusive to all newspapers).

Discuss, (or should that be disgust ?) with particular reference to sales of gold and purchase of US Treasuries.

I’m sure you have lots to write. Try not to splutter over the exam paper.

ND

Smoke and mirrors and CO2

OK, so while we're all waiting for CU's big news: today the Grauniad publishes a leaked DTI memo making it clear that there’s not a hope in global-warming hell that the UK will meet Blair’s much-vaunted target for renewable energy. Yep, we’re going to miss it by a mile.

What’s more, Blair knew this all along – but you guessed that anyway. (Presumably this leak has been cleared with McBroon, who definitely wasn’t even in the UK over the last 10 years, as we know, let alone Chancellor of the Exchequer with dominion over domestic policy.)

As it happens, the target for “renewables” – diseased carcasses and all – was a fatuous, if expensive, gesture all along. What’s fun, though, is to see the civil servants suggesting all manner of wheezes and cover-ups that ministers can use to wriggle off their self-inflicted hook. The Grauniad covers several juicy aspects – the “statistical interpretations of the target that would make it easier to achieve”, the plans to lobby Eurocrats for “flexibility-based options” (don’t you love civil service euphemisms).

But it’s worth reading the whole sordid 16 pages because there are other nuggets to be prospected:

● a wonderful piece of sophistry: if we were to meet our renewables target, we would trash the price of carbon emissions permits – so let’s not meet the target (I am not making this up)

● if we are to get even within sniffing distance of half of the renewables target it will only be by burning frankly infeasible amounts of biofuels, with a whole range of detrimental consequences (even George Monbiot agrees on this point)

● the DTI (as was) doesn’t reckon any Carbon Capture & Storage schemes (CCS) will be developed by 2020 (see earlier stories on this blog, where we reported Minister Malcolm Wicks assuring us they were profitable)

● neither is the government at all sure nucs will be economic ‘in the next decade or so’ - again, despite protestations to the contrary, including from McBroon himself

And so it goes on. The gap between rhetoric and actuality has rarely been bigger.

ND

Sunday Business Round Up - The heat is on

In more ways than one, as Mrs Slicker is currently in early Labour. I have tried to convince her of a sane alternative; but we shall be on our way to hospital at some point today more than likely.

As for the Sunday Papers; the business sections are easily the most interesting this week.




(image hat-tip Newsint.org)

Hedge funds to blame - says the Telegraph.

...and don't go back into the market yet - Although the end tone of this article is almost comical in its faith that all will be fine.

The governments will print more money to help sooth the crisis - but will this fuel inflation?

The people who will suffer from the credit crunch - The Guardian notes the central banks have not helped the plight of the actual sub-prime mortgage holders.

ICI still for sale - Even as some leveraged deals like Sainsbury's fall apart. it looks like this one will go (it better, I took a punt on this last week as the share price collapsed).

Gold not to be a safe haven this time? - one for Sackerson to ponder here.

Dubai to but Nordic stock exchange - Following our theme on Sovereign funds, here comes Dubai to wreck a NASDAQ bid.

Spanish fight back on Heathrow - BAA make some outlandish demands to counter all the negative PR this week. Ouch for them buying BAA with so much debt. yea for them that the Government will no doubt recommend break up and make their assets worth a fortune!

Superstores damage small businesses - So the Pope is Catholic after all. What this article lacks is balance. How good a quality is your local store; better than an M&S food?

BBC iplayer - How market distortion does not help.