I don't know how many people are aware of negative (wholesale) prices in the energy industry. They often come as a surprise to the layman, but were easily and correctly predicted by those who understood the game, way back when electricity was first mooted as a candidate for being commoditised and de-monopolised into a traded market. They would arise because some kind of pricing dynamics would be needed that disincentivised over-production.
Why would this be an issue? (a) The difference between peak demand (6 pm on a freezing winter's evening) and least demand (3 am on a hot summer's morning) is extreme, and both must be catered for, ideally via price signals; (b) quite a lot of electricity generation is "must run" - nuclear and run-of-river hydro being the traditional ones, but even back in the early nineties it was obvious that solar- and wind-power would be coming on in ever larger quantities. (Of course, in those cases "must run" is by green-policy fiat, whereas nuclear is to a large extent a safety issue.**) So there was always the logical possibility that must-run would exceed demand, at which point some generators whose marginal cost was zero might need to be offered a lower-than-zero price - i.e. paid not to generate.
And so it transpired, mostly in the German electricity market++ to start with. I've written about German power dynamics before: they are bizarre (the Energiewende is absolutely inane) and the cogniscenti weren't even slightly surprised when it started happening there. However, such was the widespread puzzlement in Germany itself^^, the leading technical stiftung in that country, Fraunhofer, started publishing minute-by-minute explanations of each and every instance. (This was when the examples were fewer than one a month. They soon became much more frequent, and the good Fraunhofervolk began to tire of doing these analyses.)
Short periods of negative pricing are now utterly commonplace in electricity markets around the world. (Dis)incentivising via price signals is not the only mechanism for balancing electricity grids, of course: grid operators typically retain the right to make generators switch off because they're told to. However, in the case of 'green' electricity (and sometimes other generators) there is often compo to be paid - part of the less-visible subsidy regime, even if no premium is paid for the electricity they do generate. But market mechanisms are best.
Rich Irony Now we come to the funny bit. The costs of constructing some types of renewable electricity generation sets are plummeting, especially for wind and solar; and of course the variable costs are close to zero. In several markets, they don't need the traditional type of subsidy - a guaranteed offtake price - any more. That's great. (There are other, less obvious subsidies on offer, such as not being made to pay for the trouble their intermittency cause the grid.)
But here's the thing. In many countries now there are auctions for who gets to build new generating plant, where bidding is for how much subsidy you'll accept - lowest bidders win. Already, some applicants have bid in at zero, meaning they don't need a cash subsidy at all ... Sometime soon, windfarms are going to start bidding in at "negative subsidies", i.e. they will be willing to pay in order to join the game!
Ain't markets wonderful?
ND
_____________________
** Of course the very existence of nuclear power is by policy-fiat, too
++ For afficianados, there was also an early (and quite unexpected) instance of a negative price in the UK gas market, where the underlying logic is the same, though conditions are rarely so extreme as in electricity. It was, in essence, a freak occurence, albeit wholly explicable after the event
^^ As noted here before, even educated and professional Germans truly don't understand how markets work
Technical Note (may safely be skipped): a word on one of the
technical spin-offs of all this. Some readers may be aware that
"traditional" modelling of the seemingly random and jerky behaviours of
spot prices in commodity markets uses "geometric brownian motion" as the
explanatory mathematical assumption to capture volatility, with its
associated parabolic function. It works brilliantly for
post-rationalising & analysing price evolution across all the "traditional"
commodities - metals, oil, agriculturals etc (in conjunction with a mean-reverting function, and
sometimes a seasonality function and a drift factor). It even worked
for modelling natural gas when that started to be traded, notwithstanding
spot prices in that market that were (and remain) vastly more volatile than
ever before encountered. But it doesn't work for power: (a) because the
extremes of electricity prices include blips that are more even extreme
than can be "explained" by a standard volatility function, however high you turn the dial; and (b)
brownian motion can't "explain" / represent negative prices! Another
function was required. I'm proud to say that Enron had people doing
original mathematics: and to cut through the heavy stuff (though I can
explain if you wish ...) the answer was an inverse hyperbolic sine (sinh-1), coupled with a Poisson distribution for the blips.
Now you know.
Friday, 17 April 2020
Thursday, 16 April 2020
An Eruption on the Left
With the implosion of Bernie Sanders and the final damping of the pitiful Long-Bailey squib, the misery for the Anglo-left seemed complete for the time being; and I was planning to write about how the comrades were settling down for a period of dispirited low-key rumination, whistling in the dark and trying to persuade each other to stay in the Party, stay engaged, stay strong.
Strong? Just about the strongest strategic move they've taken in 2020 has been to accommodate themselves as best they know to the quickly-apparent inevitability of Starmer - trying to pour a thin layer of quick-setting cement on his left-gesturing *pledges*, despite the manifest lame hopelessness of this gambit. And there might yet be a post on that some day soon: I remain fascinated by how the thoughtful and well-intended fraction of the Corbynist project is going to evolve.
But then; instead of the next event in the grid of their leftist lives being the EHRC report on anti-semitism ... along comes the Mantel-sized blockbuster that is the leaked internal report. What an eruption!
The early responses are quite revealing.
The Tories never behave like this ... Yes, boys and girls, it's you!
ND
Strong? Just about the strongest strategic move they've taken in 2020 has been to accommodate themselves as best they know to the quickly-apparent inevitability of Starmer - trying to pour a thin layer of quick-setting cement on his left-gesturing *pledges*, despite the manifest lame hopelessness of this gambit. And there might yet be a post on that some day soon: I remain fascinated by how the thoughtful and well-intended fraction of the Corbynist project is going to evolve.
But then; instead of the next event in the grid of their leftist lives being the EHRC report on anti-semitism ... along comes the Mantel-sized blockbuster that is the leaked internal report. What an eruption!
The early responses are quite revealing.
- See, we could have won in 2017, we wuz betrayed, we wuz robbed!
- The Tories never behave like this!
- Those centrists [sic] are genuinely nasty! And from some ...
- Now we really gotta leave this horrible party!
The Tories never behave like this ... Yes, boys and girls, it's you!
ND
Tuesday, 14 April 2020
Ending lockdown - brand strategy needed
I really hope the Government can do a better job of Lockdown undoing than they did of doing it in the first place.
If we remember those heady weeks of er... last month, we can recall the Government seemed taken aback by the speed of the epidemic spread, as was every Government in Europe and North America.
Now though we have more time to consider how we get out of this box, as there are a few things that need sorting first:
1) As per yesterday, antibody tests and copious full body PPE for the NHS key workers.
2) Low enough community tranmission that the whole pandemic won't just start up again immidiately.
3) Enough extra NHS capacity to cope for a year with a few thousand people on ventilators at any one time.
Only really point 3 has been achieved, so we will be here another couple of weeks. But the lockdown must be released to save the economy but also in a flexible way that allows it to be re-imposed if needs must. The way to do this it to have a simple colour coded system.
This system can be used on motoroway signs, train stations, TV/Radio ads etc to let the population know where we are at any time. I would propose something like the below:
Chilli - Full lockdown as now, no going out, to be saved for when deaths are over 400 a day
Lemon - Travel to work, with masks, if needed, schools open, restaurants and cafes for takeaways, football behind closed doors etc.
Apple - social distancing stil in place, wearing masks when travelling, leisure open but with social distancing measures ( e.g less covers in restaurants, limited people in pubs, 50% capacity in sports stadiums)
It will only be with a vaccine in place of herd immunity that we will release from Apple status - so maybe not until spring 2021. In the meantime we need something that gives the populace a guide as to how they can live under this Covid-19 threat, but to do so responsibly and effectively whilst balancing risk and work.
If you like this idea, feel free to promote it, I am keen the Government make a better fist of explaining this clearly than they did in March when we entered the lockdown.
If we remember those heady weeks of er... last month, we can recall the Government seemed taken aback by the speed of the epidemic spread, as was every Government in Europe and North America.
Now though we have more time to consider how we get out of this box, as there are a few things that need sorting first:
1) As per yesterday, antibody tests and copious full body PPE for the NHS key workers.
2) Low enough community tranmission that the whole pandemic won't just start up again immidiately.
3) Enough extra NHS capacity to cope for a year with a few thousand people on ventilators at any one time.
Only really point 3 has been achieved, so we will be here another couple of weeks. But the lockdown must be released to save the economy but also in a flexible way that allows it to be re-imposed if needs must. The way to do this it to have a simple colour coded system.
This system can be used on motoroway signs, train stations, TV/Radio ads etc to let the population know where we are at any time. I would propose something like the below:
Chilli - Full lockdown as now, no going out, to be saved for when deaths are over 400 a day
Lemon - Travel to work, with masks, if needed, schools open, restaurants and cafes for takeaways, football behind closed doors etc.
Apple - social distancing stil in place, wearing masks when travelling, leisure open but with social distancing measures ( e.g less covers in restaurants, limited people in pubs, 50% capacity in sports stadiums)
It will only be with a vaccine in place of herd immunity that we will release from Apple status - so maybe not until spring 2021. In the meantime we need something that gives the populace a guide as to how they can live under this Covid-19 threat, but to do so responsibly and effectively whilst balancing risk and work.
If you like this idea, feel free to promote it, I am keen the Government make a better fist of explaining this clearly than they did in March when we entered the lockdown.
Monday, 13 April 2020
Can the NHS take it?
Herd immunity, a phrase spat out by Beth Rigby and Adam Boulton, is in fact the only route out of our crisis. A six month lockdown is not going to find any obedient takers. There is a small chance people might go for a in and out type strategy where we get sent home again for a few weeks for a week or two out again. This will work better when we have an antibody test.
What I have not seen though, amongst the cheerleading for the NHS, is that when reality hits in a few weeks time, it could get nasty. For lockdown to end, we need to accept ongoing illness and deaths. The NHS workers have to deliver this and risk themselves at the same time. Over time, when they see everyone else going back to normal this will be resented by them - as I would myself.
Where is the danger money? Where is the 💯 effective PPE and process?
Without these it is only a matter of time until the unions strike or the NHS suffers mass illness and nurses and careers stop going to work. I think both of these remedies can be found but they need to be high on the Government’s agenda. Also it needs to be clear to the public that we are expecting those in the NHS to suffer as footsoldiers in war and to treat them with the respect this deserves.
What I have not seen though, amongst the cheerleading for the NHS, is that when reality hits in a few weeks time, it could get nasty. For lockdown to end, we need to accept ongoing illness and deaths. The NHS workers have to deliver this and risk themselves at the same time. Over time, when they see everyone else going back to normal this will be resented by them - as I would myself.
Where is the danger money? Where is the 💯 effective PPE and process?
Without these it is only a matter of time until the unions strike or the NHS suffers mass illness and nurses and careers stop going to work. I think both of these remedies can be found but they need to be high on the Government’s agenda. Also it needs to be clear to the public that we are expecting those in the NHS to suffer as footsoldiers in war and to treat them with the respect this deserves.
Saturday, 11 April 2020
"The Only Free Lunch ..."
A couple of weeks ago I did a piece on Black Swans involving some technical stuff on risk management, and someone asked if there was more. Well indeed there is ... and this morning I'll pick up on some of the issues raised by our discussion on attempting to envisage some rational basis for determining a logical quantum of self-sufficiency or, as Mark Wadsworth put it, the "efficiency vs reliability" debate.
We can readily agree that full self-sufficiency is an implausible national goal. It lay at the heart of North Korea's Juche *philosophy*, and look where that got them, even as they remain dependent on China for all manner of important things. As one of our esteemed Anon's said BTL, "... trade vs self sufficiency, surely it's not an either/or proposition? The sin would appear to have become so reliant on single sources, which has many sources of blame, including the 'lowest price' mentality".
In normal times, it's positively beneficial to procure almost anything from multiple sources. When one lets you down, the likelihood is another will come good. Plus, you tend to get better prices because (a) you shop around and obtain good price discovery; and (b) suppliers quickly find you're not a mug. (Obviously, if we thought to add Australia to our list of toilet-roll suppliers, the transportation costs would overwhelm the benefits of competition in that particular case.)
The price benefit can be real enough, but just as important is the risk-management principle involved - diversification, sometimes known as the only free lunch. Describing it technically, we are relying on the variables of failure of each source of supply as being less than 100% positively correlated. The maths involved here is Portfolio Theory, and it's an exceptionally important principle - at its simplest, well known thoughout the ages. You can find it in the Bible (Ecclesiastes 11:2, v6), Shakespeare (Merchant of Venice); and Churchill famously stated "Safety and certainty in oil lie in variety and variety alone". (He was referring to his policy of sourcing oil for the Admiralty from more sources than just Persia, which had been the case in the early years of RN steamships.) Not my job to advise anyone on personal investment, but everyone needs to bear it in mind: it has a role to play in every portfolio, large and small.
The second part of Anon's comment was also on the money. "Perhaps it's time to start have rules on what %age of a good can be sourced from a single, foreign, nation or economic bloc? Security, after all, comes from plurality. Self sufficiency just changes *who* can take you hostage, rather than remove the threat. Add to that a minimum amount sourced internally, even it means having a nationalised source, with the capability of scaling up where possible, allows for flexibility and security of materials?" This is exactly what happens in a good commercial risk-management regime - rules such as "no more than 20% of our business with a single counterparty" are instituted. Quite a lot of valid maths can be put into this, to come up with something "optimal" - under a given set of assumptions. The key, of course, is to price in the risk, to counter Anon's issue of going for the lowest (nameplate) price. We may return to risk-pricing on another occasion, if we've the appetite for even more technicalities (when we've nothing better to do in lockdown ...)
A free lunch ... but when the custard really hits the fan, variables that were heretofore less than perfectly correlated suddenly become highly correlated, all in the same direction - downwards. If Tesco has run out of toilet paper, so too has Sainsbury - and it ain't a coincidence. At this point the maths no longer helps us, and we're down to inventory, improvisation, *requisitioning*, sauve qui peut ... and ultimately, privation.
Thus far, Covid-19 has mostly exposed lack of diversification in medical supplies of various sorts. There's every reason to believe that, as the months wear on and the tide recedes still further, we'll find who's been swimming without trunks on a lot more beaches. Starting with food ..?
ND
We can readily agree that full self-sufficiency is an implausible national goal. It lay at the heart of North Korea's Juche *philosophy*, and look where that got them, even as they remain dependent on China for all manner of important things. As one of our esteemed Anon's said BTL, "... trade vs self sufficiency, surely it's not an either/or proposition? The sin would appear to have become so reliant on single sources, which has many sources of blame, including the 'lowest price' mentality".
In normal times, it's positively beneficial to procure almost anything from multiple sources. When one lets you down, the likelihood is another will come good. Plus, you tend to get better prices because (a) you shop around and obtain good price discovery; and (b) suppliers quickly find you're not a mug. (Obviously, if we thought to add Australia to our list of toilet-roll suppliers, the transportation costs would overwhelm the benefits of competition in that particular case.)
The price benefit can be real enough, but just as important is the risk-management principle involved - diversification, sometimes known as the only free lunch. Describing it technically, we are relying on the variables of failure of each source of supply as being less than 100% positively correlated. The maths involved here is Portfolio Theory, and it's an exceptionally important principle - at its simplest, well known thoughout the ages. You can find it in the Bible (Ecclesiastes 11:2, v6), Shakespeare (Merchant of Venice); and Churchill famously stated "Safety and certainty in oil lie in variety and variety alone". (He was referring to his policy of sourcing oil for the Admiralty from more sources than just Persia, which had been the case in the early years of RN steamships.) Not my job to advise anyone on personal investment, but everyone needs to bear it in mind: it has a role to play in every portfolio, large and small.
The second part of Anon's comment was also on the money. "Perhaps it's time to start have rules on what %age of a good can be sourced from a single, foreign, nation or economic bloc? Security, after all, comes from plurality. Self sufficiency just changes *who* can take you hostage, rather than remove the threat. Add to that a minimum amount sourced internally, even it means having a nationalised source, with the capability of scaling up where possible, allows for flexibility and security of materials?" This is exactly what happens in a good commercial risk-management regime - rules such as "no more than 20% of our business with a single counterparty" are instituted. Quite a lot of valid maths can be put into this, to come up with something "optimal" - under a given set of assumptions. The key, of course, is to price in the risk, to counter Anon's issue of going for the lowest (nameplate) price. We may return to risk-pricing on another occasion, if we've the appetite for even more technicalities (when we've nothing better to do in lockdown ...)
A free lunch ... but when the custard really hits the fan, variables that were heretofore less than perfectly correlated suddenly become highly correlated, all in the same direction - downwards. If Tesco has run out of toilet paper, so too has Sainsbury - and it ain't a coincidence. At this point the maths no longer helps us, and we're down to inventory, improvisation, *requisitioning*, sauve qui peut ... and ultimately, privation.
Thus far, Covid-19 has mostly exposed lack of diversification in medical supplies of various sorts. There's every reason to believe that, as the months wear on and the tide recedes still further, we'll find who's been swimming without trunks on a lot more beaches. Starting with food ..?
ND
Thursday, 9 April 2020
Self-Sufficiency: Good or Bad?
Our old friend Sackerson and I have periodically debated between ourselves what attitude one should take as regards national self-sufficiency. On the one hand, to be dependent upon imports for any vital need is to offer a hostage to fortune in difficult times. The very concept of the nation-state is often identified with this situation. Only when man (or proto-man) existed in isolated and self-sufficient communities could reliance on trade be thought of as irrelevant. On this analysis, nation-states exist when, and because of, the move to specialisation and trading, which requires the thus-extended and non-independent communities to organise in such a way as to (attempt to) make this a viable state of affairs. Sometimes, typically in warfare or conditions of famine etc, such arrangements fail. History is littered with case studies, Germany in WW2 being a fine example: suppose the Third Reich had been self-sufficient in raw materials ..? Today, China is endlessly nervous about its own dependencies on imported raw materials - just as we are about their monopoly on rare earths.
On the other hand: given this potentially fatal outcome, why do people surrender their self-sufficiency in favour of specialise+trade at all? Because it is a thousandfold more efficient to do so - in "normal" times! Even George Monbiot rapidly tired of life as a subsistence farmer; and many on the green-left reject what is termed "deep adaptation" (= living in caves). All capitalist instincts (and not just doctrinaire capitalism either) speak in favour of doing what we're good at, and buying those wonderful things someone else excels at.
So - how is the balance to be struck? How does a government decide what percentage of, say, the country's electricity should be generated within its own borders, or (a similar problem) how many rarely-to-be-used snowploughs should litter one corner of Heathrow airport? How much Risk Capital should a bank hold? How high should the Dutch dykes be? Or how big should be our armed forces, to rectify matters when "normal" affairs get out of hand? In the abstract: how much of our resources should be tied up, how much potential comfort should we forgo today, against adverse future contingencies?
Let's cut to the chase: we are on a continuum and there is no definitive socio-economic calculation to be done. There is indeed a ton of maths and modelling we can do, with Nobel prizes on offer for advances in technical Risk Management analysis - but the basic inputs include critical and wholly subjective judgements**. So nobody should get hung up over what can be portrayed as, or mistaken for, a science. Only towards the very ends of the spectrum can anything strong be stated, e.g. (a) the Vatican isn't a viable state, and needs to be embedded in something a lot bigger; (b) Canada is very fortunately placed, and very unusually so (and even Canada is somewhat parasitic on the USA for defence); and (c) the dykes had better be higher than the average high-water mark.
Covid-19 makes this otherwise rather academic debate ultra-real; climate change ditto. (For example: we may note that in some quarters it seems to count as wicked not to be self-sufficient in ventilators and virus testing chemicals; but just fine to depend on migrants to staff the NHS ...) And when it comes to reordering the world in due course, some highly motivated parties will be competing for control over those "critical and wholly subjective judgements".
We can at least be grateful they won't include Bernie Sanders^^ or John McDonnell.
ND
____________________
** Another post, maybe. I can bore for England on this
^^ Definitely another post! There are fascinating developments on the lefty front
On the other hand: given this potentially fatal outcome, why do people surrender their self-sufficiency in favour of specialise+trade at all? Because it is a thousandfold more efficient to do so - in "normal" times! Even George Monbiot rapidly tired of life as a subsistence farmer; and many on the green-left reject what is termed "deep adaptation" (= living in caves). All capitalist instincts (and not just doctrinaire capitalism either) speak in favour of doing what we're good at, and buying those wonderful things someone else excels at.
So - how is the balance to be struck? How does a government decide what percentage of, say, the country's electricity should be generated within its own borders, or (a similar problem) how many rarely-to-be-used snowploughs should litter one corner of Heathrow airport? How much Risk Capital should a bank hold? How high should the Dutch dykes be? Or how big should be our armed forces, to rectify matters when "normal" affairs get out of hand? In the abstract: how much of our resources should be tied up, how much potential comfort should we forgo today, against adverse future contingencies?
Let's cut to the chase: we are on a continuum and there is no definitive socio-economic calculation to be done. There is indeed a ton of maths and modelling we can do, with Nobel prizes on offer for advances in technical Risk Management analysis - but the basic inputs include critical and wholly subjective judgements**. So nobody should get hung up over what can be portrayed as, or mistaken for, a science. Only towards the very ends of the spectrum can anything strong be stated, e.g. (a) the Vatican isn't a viable state, and needs to be embedded in something a lot bigger; (b) Canada is very fortunately placed, and very unusually so (and even Canada is somewhat parasitic on the USA for defence); and (c) the dykes had better be higher than the average high-water mark.
Covid-19 makes this otherwise rather academic debate ultra-real; climate change ditto. (For example: we may note that in some quarters it seems to count as wicked not to be self-sufficient in ventilators and virus testing chemicals; but just fine to depend on migrants to staff the NHS ...) And when it comes to reordering the world in due course, some highly motivated parties will be competing for control over those "critical and wholly subjective judgements".
We can at least be grateful they won't include Bernie Sanders^^ or John McDonnell.
ND
____________________
** Another post, maybe. I can bore for England on this
^^ Definitely another post! There are fascinating developments on the lefty front
Saturday, 4 April 2020
Light, Mirror ... Camera, Action: Wolf Hall 3
Having praised Wolf Hall to the skies here - for its writing, its takes on court politics and fake news, its take-down of Bolt's Thomas More - now, after an impatient decade, I've devoured all 800+ pages of Book 3, The Mirror and the Light. In truth, Mantel was by any standards an unconscionable time completing the trilogy; but it could fairly be argued she used the time well because there's evidence of a lot more research having been done (if not, errr, nine years worth) and I could just about say it was worth the wait.
We always knew how it would end, of course; and in various learned articles (and interviews with Mantel herself) we'd been given hints as to how she was going to settle her account. The very precise beginning and end of the story-arc (so now get up!) had already been explained by her; and the suggestion had been made that Henry VIII would end up treating Cromwell and everyone else essentially the same as he treated his wives. I'm not sure that latter interpretation / prediction got it right: the dynamic of who's up and who's down in no-holds-barred court politics is unsavoury, but probably quite enough to account for our hero's temporary, but in the circumstances fatal, fall from favour. But Mantel's fabulous extended illustration is taken full-cycle, of how poor a grasp we have on "facts", publicly and privately - even for a man with a memory and a grip on reality as strong as Comwell's.
Wolf Hall has set me back to Foxe's Protestant Martyrs, clearly one of Mantel's main sources. What an amazing text that is: and what a bastard Stephen Gardiner was. Mantel agrees. Or perhaps we now need an author to do for him, contra Mantel, what she's done for Cromwell contra Bolt.
All the book prizes Christendom has to offer surely cannot be far behind. Oh, and the TV version: bring it on (up)!
ND
We always knew how it would end, of course; and in various learned articles (and interviews with Mantel herself) we'd been given hints as to how she was going to settle her account. The very precise beginning and end of the story-arc (so now get up!) had already been explained by her; and the suggestion had been made that Henry VIII would end up treating Cromwell and everyone else essentially the same as he treated his wives. I'm not sure that latter interpretation / prediction got it right: the dynamic of who's up and who's down in no-holds-barred court politics is unsavoury, but probably quite enough to account for our hero's temporary, but in the circumstances fatal, fall from favour. But Mantel's fabulous extended illustration is taken full-cycle, of how poor a grasp we have on "facts", publicly and privately - even for a man with a memory and a grip on reality as strong as Comwell's.
Wolf Hall has set me back to Foxe's Protestant Martyrs, clearly one of Mantel's main sources. What an amazing text that is: and what a bastard Stephen Gardiner was. Mantel agrees. Or perhaps we now need an author to do for him, contra Mantel, what she's done for Cromwell contra Bolt.
All the book prizes Christendom has to offer surely cannot be far behind. Oh, and the TV version: bring it on (up)!
ND
Wednesday, 1 April 2020
Maybe a little private enterprise could help here?
Sorry for the absence this week, family illness and other things have taken up all spare time.
The non-stop Covid news is very trying for all of us. The era of 24 media is a distressing one, things are bad enough without the constant stream of inane takes (yes, I get the irony!) across all news outlets, many of whom have given up reporting for the cheaper option of just cut 'n paste Reuters and add some views.
A current issue being raised is the lack of testing for Covid in the UK. Clearly, we are well behind the curve on what we could have done to stop the spread. But us and most European countries.
We should have stopped international football and skiing trips etc. "If only" we will be saying for years to come after this.
However, on the current media spasm around PPE and testing I feel the NHS has a lot to answer for. There is no real shortage of PPE at the basic level, but distribution to the right places has been poor. Moreover, I know of plenty of suppliers keen to help with equipment, but NHS procurement has long processes and rules - it only buys from those it knows already. Addtionally, it has an aversion to dealing with the private sector. By contrast, in Germany they are very far ahead procurement for testing and PPE but worked with Bayer a few weeks ago to produce an effective cheap test and manufacturing capability.
The NHS wanted to do it in house and to work with Universities and their laboratories. Perhaps they would have been better to speak to GSK or to contract it out to them - but if you have socialised medicine it means a socialised approach. I note the US, for all of its many mistakes, also has plenty of testing available....as does Korea, Singapore etc. The questions are being asked of the government, but as ever in the UK, complete worship of the NHS (this is not to do down a sterling effort by it frontline currently has to include all its staff - when the admin side we know is very weak indeed) means that the buck cannot stop where the issue lies.
It is not too late to change course, I see the Government has been super keen on "Dyson" ventilators which has had the Left in fits of vapours about Brexit - in reality it is a sensible move in these dark days to put all hands to the pump, literally.
Let's hope the NHS and Government are learing some fast lessons about moving quickly becuase unfortunately the situation is going to get very bad now, very quickly for a time.
The non-stop Covid news is very trying for all of us. The era of 24 media is a distressing one, things are bad enough without the constant stream of inane takes (yes, I get the irony!) across all news outlets, many of whom have given up reporting for the cheaper option of just cut 'n paste Reuters and add some views.
A current issue being raised is the lack of testing for Covid in the UK. Clearly, we are well behind the curve on what we could have done to stop the spread. But us and most European countries.
We should have stopped international football and skiing trips etc. "If only" we will be saying for years to come after this.
However, on the current media spasm around PPE and testing I feel the NHS has a lot to answer for. There is no real shortage of PPE at the basic level, but distribution to the right places has been poor. Moreover, I know of plenty of suppliers keen to help with equipment, but NHS procurement has long processes and rules - it only buys from those it knows already. Addtionally, it has an aversion to dealing with the private sector. By contrast, in Germany they are very far ahead procurement for testing and PPE but worked with Bayer a few weeks ago to produce an effective cheap test and manufacturing capability.
The NHS wanted to do it in house and to work with Universities and their laboratories. Perhaps they would have been better to speak to GSK or to contract it out to them - but if you have socialised medicine it means a socialised approach. I note the US, for all of its many mistakes, also has plenty of testing available....as does Korea, Singapore etc. The questions are being asked of the government, but as ever in the UK, complete worship of the NHS (this is not to do down a sterling effort by it frontline currently has to include all its staff - when the admin side we know is very weak indeed) means that the buck cannot stop where the issue lies.
It is not too late to change course, I see the Government has been super keen on "Dyson" ventilators which has had the Left in fits of vapours about Brexit - in reality it is a sensible move in these dark days to put all hands to the pump, literally.
Let's hope the NHS and Government are learing some fast lessons about moving quickly becuase unfortunately the situation is going to get very bad now, very quickly for a time.
Friday, 27 March 2020
Winners and losers of Covid19 pandemic
Winners so far:
Strong goverments who put it about a bit...
Amazon - having nearly destroyed the retail economies of the West, they have now been handed them on a plate...
Toilet Roll Makers - surely a one off in history?
Medics and carers - becuase they are so key and important at this time
Rishi Sunak - all those female journalists seem to like socialist policies from a good looking guy - who knew?
Super Market Workers - this get the award for the most surprising heroes of the coronavirus war
Loser so far:
Libertarians - sadly total freedom when your whole species is under attack does not cut it as a political strategy.
Airlines and Tourism - This will turn out to be a real long term hit, less travel, just like after 9/11 is baked into the system now. Countries may keep their strict visa systems too.
Government debt - an early and fatal casualty has been any ideas around keeping some sort of track on the Government spending. At least we won't be needing a new runway at Heathrow anymore.
China - not happy with their Government, not one bit.
Strong goverments who put it about a bit...
Amazon - having nearly destroyed the retail economies of the West, they have now been handed them on a plate...
Toilet Roll Makers - surely a one off in history?
Medics and carers - becuase they are so key and important at this time
Rishi Sunak - all those female journalists seem to like socialist policies from a good looking guy - who knew?
Super Market Workers - this get the award for the most surprising heroes of the coronavirus war
Loser so far:
Libertarians - sadly total freedom when your whole species is under attack does not cut it as a political strategy.
Airlines and Tourism - This will turn out to be a real long term hit, less travel, just like after 9/11 is baked into the system now. Countries may keep their strict visa systems too.
Government debt - an early and fatal casualty has been any ideas around keeping some sort of track on the Government spending. At least we won't be needing a new runway at Heathrow anymore.
China - not happy with their Government, not one bit.
Tuesday, 24 March 2020
Why Hitchens Is Wrong
This is potentially going to upset some of our most loyal readership, but ... Hitchens is Wrong.
I first met him a long time ago: I was editor of a student newspaper and he came to interview me. His write-up was flattering, and he didn't choose to report that we carried nudes on page 3. Student life was more robust in those years: pitched street battles with the NF; open IRA meetings in pubs; it took (if I may say so) balls to be a rightwinger in them days. Many students are stroppy and angry now, but they are a bunch of wimps. (If anyone had taken against the statue of Cecil Rhodes back then - and they didn't - it would have been torn down and smashed the same evening. "Rhodes Must Fall"? Pah.) Students I meet nowadays say: it seems to us that you had more fun back then ... and indeed we did.
But I disgress. Hitchens wrote recently in opposition to a lock-down and associated regulations:
We all understand that argument, but it's irrelevant. Oh, and by the way, even the universally Godfearing populations of the 15th, 16th and 17th centuries were not at all sanguine about the Plague.
So keep going with your articulate contrarian stuff, Hitchens - you're allowed to, and it's needed. (Peregrine Worsthorne had an even better line in columnar contrariness - really ingenous, he was.) But you've overcooked it this time.
And now I must go and bury a close relative. They tell us it wasn't the virus; but it was certainly pneumonia, and who knows these days?
Have at it in the comments. Fearlessly.
ND
I first met him a long time ago: I was editor of a student newspaper and he came to interview me. His write-up was flattering, and he didn't choose to report that we carried nudes on page 3. Student life was more robust in those years: pitched street battles with the NF; open IRA meetings in pubs; it took (if I may say so) balls to be a rightwinger in them days. Many students are stroppy and angry now, but they are a bunch of wimps. (If anyone had taken against the statue of Cecil Rhodes back then - and they didn't - it would have been torn down and smashed the same evening. "Rhodes Must Fall"? Pah.) Students I meet nowadays say: it seems to us that you had more fun back then ... and indeed we did.
But I disgress. Hitchens wrote recently in opposition to a lock-down and associated regulations:
Is shutting down Britain – with unprecedented curbs on ancient liberties – REALLY the best answer? ... I see very little evidence of a pandemic, and much more of a PanicDemic ... Epidemic disasters have been predicted many times before and have not been anything like as bad as feared ... dissent at this time will bring me abuse and perhaps worse. But I am not saying this for fun, or to be ‘contrarian’ –that stupid word which suggests that you are picking an argument for fun. This is not fun. This is our future, and if I did not lift my voice to speak up for it now, even if I do it quite alone, I should consider that I was not worthy to call myself English or British, or a journalist, and that my parents’ generation had wasted their time saving the freedom and prosperity which they handed on to me after a long and cruel struggle whose privations and griefs we can barely imagine.No time to write a lengthy rebuttal, so let's cut to the chase. We All Know What He Means: and even the Grauniad (this is significant, subject of a later post perhaps) argued strongly for the sunset clause to be set at 6 months, not 48. True, what's happening now is, in large measure Fear of Fear Itself. But it's real, for all that, and needs to be addressed as such. To say that the population - the real 2020 population of individuals who routinely behave as though they expect and deserve to live forever, not the WW2 generation that knew better - could and should take a higher level of "avoidable" early deaths on the chin, is like saying that nobody alive today suffers from "Absolute Poverty" because they all have smart 'phones and housing benefit.
We all understand that argument, but it's irrelevant. Oh, and by the way, even the universally Godfearing populations of the 15th, 16th and 17th centuries were not at all sanguine about the Plague.
So keep going with your articulate contrarian stuff, Hitchens - you're allowed to, and it's needed. (Peregrine Worsthorne had an even better line in columnar contrariness - really ingenous, he was.) But you've overcooked it this time.
And now I must go and bury a close relative. They tell us it wasn't the virus; but it was certainly pneumonia, and who knows these days?
Have at it in the comments. Fearlessly.
ND
Monday, 23 March 2020
What purpose does keeping financial markets open serve today?
In normal times, markets are a keep lifeblood of a capitalist economy. They send the singal to participants and the Government about the state of the economy and are a general barometer of health for a market economy.
But in times of crisis they are scary places. The markets are run these days by both human traders and their pet algo's. This means they experience both euphoria in the good times and fear in the bad times. Sometimes the algo's are designed to exploit the fear even further.
At this unprecedented time of crisis, I don't see the point of the markets remaining open for stocks and shares. We know the crisis is only going to get worseover the next few weeks. Then hopefully better. As such the markets are just going to keep dropping on every bit of bad news.
Meanwhile, Government's like the UK have stepped in to effectively nationalise the workforce. A completely unprecedetned move. Plus loans and tax holidays for businesses. These may work or may not work.
So to me the unknowns are so large that the markets will have no real option but to fall much further. This only unbalances the economy further for any recovery - hurting savers and allowing well-heeled Private Equity a chance to buy up lots of companies on the cheap at a future date. The answer surely must be to halt trading for 6 weeks.
Forex can continue for trade as can commodities as these are life essentials for a function global economy. But stock markets are a one way bet and the lack of price information is not going to change how our Governments make decisions in the next few weeks.
I am amazed at the lack of discussion of this in the media - this can only be because the responsible types at the Financial Times worry that this discussion will cause a stampede to cash by retail and other investors and thus another steep fall.
However, we need to be rational, a collapsed market will not be the basis for a quick bounce back and reset in a few months time if we are lucky enough to get to that point.
Debate needed..
But in times of crisis they are scary places. The markets are run these days by both human traders and their pet algo's. This means they experience both euphoria in the good times and fear in the bad times. Sometimes the algo's are designed to exploit the fear even further.
At this unprecedented time of crisis, I don't see the point of the markets remaining open for stocks and shares. We know the crisis is only going to get worseover the next few weeks. Then hopefully better. As such the markets are just going to keep dropping on every bit of bad news.
Meanwhile, Government's like the UK have stepped in to effectively nationalise the workforce. A completely unprecedetned move. Plus loans and tax holidays for businesses. These may work or may not work.
So to me the unknowns are so large that the markets will have no real option but to fall much further. This only unbalances the economy further for any recovery - hurting savers and allowing well-heeled Private Equity a chance to buy up lots of companies on the cheap at a future date. The answer surely must be to halt trading for 6 weeks.
Forex can continue for trade as can commodities as these are life essentials for a function global economy. But stock markets are a one way bet and the lack of price information is not going to change how our Governments make decisions in the next few weeks.
I am amazed at the lack of discussion of this in the media - this can only be because the responsible types at the Financial Times worry that this discussion will cause a stampede to cash by retail and other investors and thus another steep fall.
However, we need to be rational, a collapsed market will not be the basis for a quick bounce back and reset in a few months time if we are lucky enough to get to that point.
Debate needed..
Saturday, 21 March 2020
Ride a Black Swan
One of the many great things about Enron, long before it went under, was that it brought really strong financial practices into the energy industry and made people take financial risk management (FRM) seriously. We can talk about the rich, deep ironies another time. I was never a risk manager myself, but was strictly schooled in its principles, technical and pragmatic, the better to negotiate sound contracts (which is my trade).
One of the interesting aspects of FRM is that no commercial institution, even a bank, is held to providing 99.9% certainty in its hedging etc - not even 99% in fact; because it can't be done using shareholders' equity without crippling economic cost. Everyone knows that 100% physical safety is impossible - the cost of moving from, e.g. Five Nines to Six Nines is prohibitive - and likewise that extreme financial events happen out in the "fat tails" of the distribution, that can't really be catered for within the economics of an enterprise in the same technically-sound ways that can be implemented out to two standard deviations. But what if folk are deeply risk averse, as they surely have the right to be? The textbook solution to this puzzle is that they must take (partial) responsibility for their own FRM, by diversifying their exposures. Not everything will go pear-shaped simultaneously ...
Except of course when a Black Swan glides onto the waters. At this point, hitherto non-correlated risks all become correlated, in the shit-direction: so Diversification fails (as well as hedges not performing and insurance not paying out). And then we are down to the last resorts: burning through capital reserves (which were anyway set at the 95% risk level, so by definition they don't go far enough), and then ... socialisation.
Now as CU said the other day, 2020 looks like making 2008 seem like a picnic. (E.g., I had a massive hedge on against 2008, and it paid up.) This time, it's straight through to socialisation, and pray God that good decisions are made.
A lot of Socialists are drawing understandable (sort-of) but very wrong conclusions. Wonderful, they say - and let's keep it fully socialised thereafter because Capitalism Doesn't Work. This is the merest crap. I won't rehearse what a feeble-minded misunderstanding that represents as regards What Capitalism Is; suffice to say that they were saying the same thing at the outbreak of WW1, and WW2 (and in fact every day of every week). It was equally ridiculous then as it is now. We socialise against the Black Swans, the Kaiser, the Nazis, the C-virus. And in normal times, we optimise our affairs intelligently. Leftist snipers can f*** off, and do something useful in the community. If they know how.
One more weekend thought for now. The EU can f*** off, too. Their threats will have no force whatsoever, when negotiations recommence. What, they gonna threaten us with a 1% hit on GDP? Shortages in the supermarkets and bread riots? By then, we'll have solutions for all that stuff - and quite possibly better ones than theirs. Small comfort right now, but I'd confidently say we'll get a sensible deal quite easily - with whatever's left by then.
Keep safe, all.
ND
One of the interesting aspects of FRM is that no commercial institution, even a bank, is held to providing 99.9% certainty in its hedging etc - not even 99% in fact; because it can't be done using shareholders' equity without crippling economic cost. Everyone knows that 100% physical safety is impossible - the cost of moving from, e.g. Five Nines to Six Nines is prohibitive - and likewise that extreme financial events happen out in the "fat tails" of the distribution, that can't really be catered for within the economics of an enterprise in the same technically-sound ways that can be implemented out to two standard deviations. But what if folk are deeply risk averse, as they surely have the right to be? The textbook solution to this puzzle is that they must take (partial) responsibility for their own FRM, by diversifying their exposures. Not everything will go pear-shaped simultaneously ...
Except of course when a Black Swan glides onto the waters. At this point, hitherto non-correlated risks all become correlated, in the shit-direction: so Diversification fails (as well as hedges not performing and insurance not paying out). And then we are down to the last resorts: burning through capital reserves (which were anyway set at the 95% risk level, so by definition they don't go far enough), and then ... socialisation.
Now as CU said the other day, 2020 looks like making 2008 seem like a picnic. (E.g., I had a massive hedge on against 2008, and it paid up.) This time, it's straight through to socialisation, and pray God that good decisions are made.
A lot of Socialists are drawing understandable (sort-of) but very wrong conclusions. Wonderful, they say - and let's keep it fully socialised thereafter because Capitalism Doesn't Work. This is the merest crap. I won't rehearse what a feeble-minded misunderstanding that represents as regards What Capitalism Is; suffice to say that they were saying the same thing at the outbreak of WW1, and WW2 (and in fact every day of every week). It was equally ridiculous then as it is now. We socialise against the Black Swans, the Kaiser, the Nazis, the C-virus. And in normal times, we optimise our affairs intelligently. Leftist snipers can f*** off, and do something useful in the community. If they know how.
One more weekend thought for now. The EU can f*** off, too. Their threats will have no force whatsoever, when negotiations recommence. What, they gonna threaten us with a 1% hit on GDP? Shortages in the supermarkets and bread riots? By then, we'll have solutions for all that stuff - and quite possibly better ones than theirs. Small comfort right now, but I'd confidently say we'll get a sensible deal quite easily - with whatever's left by then.
Keep safe, all.
ND
Wednesday, 18 March 2020
UBI debate - a good idea or a sily one?
As we know the virus is currently laying waste to the UK economy. The Leisure and Tourism industries combined are over £400 billion of revenues per year according to Government statistics.
The £350 billion that the Government announced in bailout loans yesterday is only going to be a band ai for a few months, unless the virus challenge is overcome, then so too will our modern economy and our Government finances.
What a challenge that will be!
However, we cna hope that the worst of it is over in the next couple of months. Until then the US Government is considering giving everyone $1000 into their accounts to help them with bills and see through these dark times. On paper I like this idea, as it is simple and easy to do (IRS/HMRC have everyone's bank account details already) - it gets the cash where it is needed.
I am less sure about Universal Basic Income as a long term play though - becuase although it should allow for a more felxible and less stressed workforce it is also ruiniously expensive. It ends up being a middle class subsidy for wannabe actors and muscisians or those who endlessly study degrees - or even those who want to apprentice as MP's for a while. Meanwhile the workes pay huge taxes to support this and the truly needy see their benefits cut.
To give an example, the NHS costs around £2200 per person, with UBI we would have to give say £500 a month for it to be realistic - so £6,000 a year. That plus the NHS is £8,2000 per person per annum. At over £750 billion, that is more than the UK Government's entire spending and 250% more than we currently spend on all social benefits and the NHS added together.
Where would the tax come from when so many people could eeek out a meagre living by doing nothing?
So for me the principle of UBI is quite sound, the practical implementation of it makes it financial suicide - what do you think?
The £350 billion that the Government announced in bailout loans yesterday is only going to be a band ai for a few months, unless the virus challenge is overcome, then so too will our modern economy and our Government finances.
What a challenge that will be!
However, we cna hope that the worst of it is over in the next couple of months. Until then the US Government is considering giving everyone $1000 into their accounts to help them with bills and see through these dark times. On paper I like this idea, as it is simple and easy to do (IRS/HMRC have everyone's bank account details already) - it gets the cash where it is needed.
I am less sure about Universal Basic Income as a long term play though - becuase although it should allow for a more felxible and less stressed workforce it is also ruiniously expensive. It ends up being a middle class subsidy for wannabe actors and muscisians or those who endlessly study degrees - or even those who want to apprentice as MP's for a while. Meanwhile the workes pay huge taxes to support this and the truly needy see their benefits cut.
To give an example, the NHS costs around £2200 per person, with UBI we would have to give say £500 a month for it to be realistic - so £6,000 a year. That plus the NHS is £8,2000 per person per annum. At over £750 billion, that is more than the UK Government's entire spending and 250% more than we currently spend on all social benefits and the NHS added together.
Where would the tax come from when so many people could eeek out a meagre living by doing nothing?
So for me the principle of UBI is quite sound, the practical implementation of it makes it financial suicide - what do you think?
Tuesday, 17 March 2020
The Virus and the Left
Wow, we have copped Interesting Times, right in the solar plexus. Given that these days, everyone operates under the slogan never let a good crisis go to waste, there's a lot of manoeuvering in prospect. And lucky old Alex Salmond, eh? And lucky old Labour Party (EHRC report).
Now then, the Left: and first to Xi, the ultimate leftie. He's probably thinking he's ridden this one out, and taken the opportunity to ramp up universal, highly-granular state micro-control into the bargain - so a rather good bargain it may seem, to him. As we wrote in Feb, mass outbreaks elsewhere may take the heat off him good and proper. Now all he has to do is promote the "US biological warfare" meme in his spare time.
Now to our own miserable Left. Obviously they are itching to go Full Hostile against Boris' handling of the thing, and of course they have the luxury of making free, cowardly sniping attacks, thinly disguised as innocent questions etc. They have form, bigtime. In WW2 they sniped at the National (coalition) government mercilessly: Churchill survived several ultra-close votes. At the start of the war, of course, the far left opposed it altogether, on Uncle Joe's orders, as a capitalist war against his ally, that nice Herr Hitler. And at the height of the Battle of Britain (as Londoners of my father's generation never forgot) the Liverpool dockers were on strike. Oh, the luxury of opposition.
And then of course there was the relentless work of the Labour Party to advance their strategic cause, triumphing in 1945 while the war on Japan was still being waged. Don't all the Labour hopefuls dream of playing Attlee to BoJo's Churchill? (Though they wouldn't want to push the analogy too far.)
Trouble is, notwithstanding the free hits the Left can make with their peashooters, their opponent Boris-Cummings seems to be sticking to the rather compelling advice of his impressive and highly-regarded scientific advisers. Experts! So all the predictable Polly Toynbees and the silly Simon Jenkins have to hold back a bit (just a bit), because what do they know? And because the government's sages advise differently to the foreigners (and who on earth would want Christine Lagarde running their banking?) ... oh, all manner of puzzles for a lefty to grapple with. (Even Aaron Bastani is a teeny bit inclined to be impressed by the government's actions. And what are the Euro-maniacs to say? "Extend the transition period" (© Lisa Nandy 2020) is a pretty feeble battle-cry from a desperate politician. (Where are Starmer and Wrong-Daily in all this, BTW?)
And: what do I know? Except that there's an acid test coming soon. Perhaps the most interesting political development is the would-be Red Guard of Momentum supposedly mobilising its private army of 100,000 to Do Good in their communities. This tries to tap into the strand of altruism, love and goodwill (sic) that definitely is to be found within the nastier rantings of the youthful 2017-vintage Corbyite left. (Seriously, it really is in there, in all the bile.) Now my observation is that, however honourable this sentiment, it doesn't typically stretch to the traditional kinds of Salvation by Good Works like actually rolling up sleeves and becoming a decent, hardworking local councillor. But who knows? The Chinese CP gained power by many years of slogging away at local level, solving ordinary people's pressing practical problems. Oh, and adroit military tactics too.
Interesting Times, eh? Keep safe, everyone.
ND
UPDATE: Kier Stamer has duly broken cover with this pious and platitudinous pile. Précis: I want to be Attlee ...
Now then, the Left: and first to Xi, the ultimate leftie. He's probably thinking he's ridden this one out, and taken the opportunity to ramp up universal, highly-granular state micro-control into the bargain - so a rather good bargain it may seem, to him. As we wrote in Feb, mass outbreaks elsewhere may take the heat off him good and proper. Now all he has to do is promote the "US biological warfare" meme in his spare time.
Now to our own miserable Left. Obviously they are itching to go Full Hostile against Boris' handling of the thing, and of course they have the luxury of making free, cowardly sniping attacks, thinly disguised as innocent questions etc. They have form, bigtime. In WW2 they sniped at the National (coalition) government mercilessly: Churchill survived several ultra-close votes. At the start of the war, of course, the far left opposed it altogether, on Uncle Joe's orders, as a capitalist war against his ally, that nice Herr Hitler. And at the height of the Battle of Britain (as Londoners of my father's generation never forgot) the Liverpool dockers were on strike. Oh, the luxury of opposition.
And then of course there was the relentless work of the Labour Party to advance their strategic cause, triumphing in 1945 while the war on Japan was still being waged. Don't all the Labour hopefuls dream of playing Attlee to BoJo's Churchill? (Though they wouldn't want to push the analogy too far.)
Trouble is, notwithstanding the free hits the Left can make with their peashooters, their opponent Boris-Cummings seems to be sticking to the rather compelling advice of his impressive and highly-regarded scientific advisers. Experts! So all the predictable Polly Toynbees and the silly Simon Jenkins have to hold back a bit (just a bit), because what do they know? And because the government's sages advise differently to the foreigners (and who on earth would want Christine Lagarde running their banking?) ... oh, all manner of puzzles for a lefty to grapple with. (Even Aaron Bastani is a teeny bit inclined to be impressed by the government's actions. And what are the Euro-maniacs to say? "Extend the transition period" (© Lisa Nandy 2020) is a pretty feeble battle-cry from a desperate politician. (Where are Starmer and Wrong-Daily in all this, BTW?)
And: what do I know? Except that there's an acid test coming soon. Perhaps the most interesting political development is the would-be Red Guard of Momentum supposedly mobilising its private army of 100,000 to Do Good in their communities. This tries to tap into the strand of altruism, love and goodwill (sic) that definitely is to be found within the nastier rantings of the youthful 2017-vintage Corbyite left. (Seriously, it really is in there, in all the bile.) Now my observation is that, however honourable this sentiment, it doesn't typically stretch to the traditional kinds of Salvation by Good Works like actually rolling up sleeves and becoming a decent, hardworking local councillor. But who knows? The Chinese CP gained power by many years of slogging away at local level, solving ordinary people's pressing practical problems. Oh, and adroit military tactics too.
Interesting Times, eh? Keep safe, everyone.
ND
UPDATE: Kier Stamer has duly broken cover with this pious and platitudinous pile. Précis: I want to be Attlee ...
Monday, 16 March 2020
2008 is going to feel like a picnic in comparison
The worst economic crisis of my life was the 2008 financial crash. As readers will know, we had long forseen a crunch coming in the credit markets due to lax Government regulations and arrogance of those in power both at the banks and the Governments.
However, 2020 feels like it will be worse. For one, those immidiately affected are the old, the poor (retiaers, coffee shop owners, airline workers etc) and the needy; not wealthy bankers losing their jobs in Canary Wharf at Lehman Brothers as the first stage.
Moreover, because this crisis is so visceral and real, the Fed last night dumping $500 billion into T-Bills and dropping interest rates by 100 basis points has made no difference. Markets are down about 6% at time of writing. Pumping more fiat money only helps the Banks and traders, it will not make people fly again nor can a coffee shop owner survive when the Government has ordered them to close.
The 3 to 4 month hiatus in the economy we are about to experience will be very hard to manage. I can see UK Government debt ballooning by £100 billion for this year and maybe next year too - there is just so much to subsidise and try to keep going. In the round, this in and of itself won't kill the Country financially (unlike Italy) but it does mean higher taxes will be coming in the 2020's to pay for all this - and who is to say this is a one off, quite the opposite, Covid-19 is a successor to H1N1, so is already not a one-time emergency.
We will have to see where things go but airlines and all forms of travels, sports and events and retail food (incidentally all amongst the big winners economically of recent trends) are all going to be smashed to pieces. Whatever world emerges by the mid-summer will look very different to the world as it was on Valentines day in the West.
However, 2020 feels like it will be worse. For one, those immidiately affected are the old, the poor (retiaers, coffee shop owners, airline workers etc) and the needy; not wealthy bankers losing their jobs in Canary Wharf at Lehman Brothers as the first stage.
Moreover, because this crisis is so visceral and real, the Fed last night dumping $500 billion into T-Bills and dropping interest rates by 100 basis points has made no difference. Markets are down about 6% at time of writing. Pumping more fiat money only helps the Banks and traders, it will not make people fly again nor can a coffee shop owner survive when the Government has ordered them to close.
The 3 to 4 month hiatus in the economy we are about to experience will be very hard to manage. I can see UK Government debt ballooning by £100 billion for this year and maybe next year too - there is just so much to subsidise and try to keep going. In the round, this in and of itself won't kill the Country financially (unlike Italy) but it does mean higher taxes will be coming in the 2020's to pay for all this - and who is to say this is a one off, quite the opposite, Covid-19 is a successor to H1N1, so is already not a one-time emergency.
We will have to see where things go but airlines and all forms of travels, sports and events and retail food (incidentally all amongst the big winners economically of recent trends) are all going to be smashed to pieces. Whatever world emerges by the mid-summer will look very different to the world as it was on Valentines day in the West.
Thursday, 12 March 2020
Sadiq Khan & Postal Votes: Just Fancy That
The mayor said he had received advice from the Chief Medical Officer on whether the local elections in May, including the London mayoral contest, should be delayed due to the pandemic.
“His advice was quite clear. He said there is no logical reason to postpone or cancel the elections. If somebody is worried about going to the polling station, it’s really important to make postal votes as easy as possible."
Never let a good crisis go to waste, eh?
ND
Budget reaction - blurgh
What budget?
Despite getting a good review in the media, Rishi Sunak's first budget has been lost in the global crisis. Was it any good?
Time will tell but my hunch is turning on the spending taps is the right call this year, the Tories have reduced the deficit and Debt/GDP ratio substantially and there is at least some room to have a year or two like this. Not unrealted are that Gilt issues are below 0%. the current cost of extra borrowing is positive - what a bizarre world we live in.
Will it help if the markets dive down into the 4000's and all but gaurantee a deep recession - a little but then the fun will begin as social security spending balloons and we have a mini-2009 deficit situation again.
At least we won't be alone, as this is more or less a global crisis that began in China...
Wednesday, 11 March 2020
Emergency measures from Central Banks to support Hedge Funds
Life is strange, here we were thinking 2020 was going to be a good year with Boris on his political honeymoon, then, boom it is all over.
The Bank of England has reduced interest rats by 0.5% to help calm the markets after a start to the week that makes it feel like 2008 again. It is the biggest move by the bank in ten years.
We may wonder, why does moving interest rates down from 0.75% to 0.25% make any real difference to the economy? And we would be right, as this move has next to no impact on the real economy. Unless you happen to be re-mortgaging today (tick for me!) and are able to take advantage of it, it makes no difference. It is not like Amex or Wonga are going to pay any attention and help their 'customers' and it is not like Banks were paying any interest on deposits anyway - such has been the ruination of our economy since 2008.
So why do it? Well this is all about banks and hedge funds. The hedge funds are borrowing money to play the markets and the ones that are doing well need more cash, the ones that are doing badly are facing huge margin calls. Some of the Asian ones facing margin calls are proving difficult to get hold of I hear.
These huge calls on the banks to lend or borrow in busy markets mean they themselves can run short of cash very quickly. The key thing for them is to be able to access the central bank Repo markets to get more money very quickly...but this money is not quite free, nearly free, but there is a price. So the banks find the busy markets a very expensive place to be and that can mean they consider limiting the action.
So they could choose to call in the money and not lend, but that runs the risk of further drops in the market, more margin calls and from 2008 we know where that leads. So instead the Central Banks are reducing the rates that they lend money at to keep the markets as liquid as they can and the Banks solvent. Keeping the banks solvent though, now means keeping the Hedgies solvent.
The side effect of all this is that Hedge Fund keep playing and Prime Brokerage banks make some lovely fat margins.
So when you see pictures in the newspapers about the lack of chinese imports or other real world causes like Corona virus, just smile to yourself. This is all about the traders and the trading. As it happens, the US Repo market is 50% busier overnight than it was in September 2008, now partly of course inflation has reduced the value or money and the economy has grown, but it is a sign that things are very awry in the financial markets.
A key week ahead I feel.
The Bank of England has reduced interest rats by 0.5% to help calm the markets after a start to the week that makes it feel like 2008 again. It is the biggest move by the bank in ten years.
We may wonder, why does moving interest rates down from 0.75% to 0.25% make any real difference to the economy? And we would be right, as this move has next to no impact on the real economy. Unless you happen to be re-mortgaging today (tick for me!) and are able to take advantage of it, it makes no difference. It is not like Amex or Wonga are going to pay any attention and help their 'customers' and it is not like Banks were paying any interest on deposits anyway - such has been the ruination of our economy since 2008.
So why do it? Well this is all about banks and hedge funds. The hedge funds are borrowing money to play the markets and the ones that are doing well need more cash, the ones that are doing badly are facing huge margin calls. Some of the Asian ones facing margin calls are proving difficult to get hold of I hear.
These huge calls on the banks to lend or borrow in busy markets mean they themselves can run short of cash very quickly. The key thing for them is to be able to access the central bank Repo markets to get more money very quickly...but this money is not quite free, nearly free, but there is a price. So the banks find the busy markets a very expensive place to be and that can mean they consider limiting the action.
So they could choose to call in the money and not lend, but that runs the risk of further drops in the market, more margin calls and from 2008 we know where that leads. So instead the Central Banks are reducing the rates that they lend money at to keep the markets as liquid as they can and the Banks solvent. Keeping the banks solvent though, now means keeping the Hedgies solvent.
The side effect of all this is that Hedge Fund keep playing and Prime Brokerage banks make some lovely fat margins.
So when you see pictures in the newspapers about the lack of chinese imports or other real world causes like Corona virus, just smile to yourself. This is all about the traders and the trading. As it happens, the US Repo market is 50% busier overnight than it was in September 2008, now partly of course inflation has reduced the value or money and the economy has grown, but it is a sign that things are very awry in the financial markets.
A key week ahead I feel.
Monday, 9 March 2020
Recession incoming?
I Know I am like a broken record now, but this is a very tough morning economically for the the world and for the UK. Don't fancy being the Chancellor trying to draw up a budget.
The Ftse is now down near 6000, having been at nearly 7500 a few short weeks ago. We started the year quite optimistically thinking getting Brexit Done and Trump pump priming the US economy ahead of an election would make for a strong year.
Now we have 3 simultaenous, but related, crises:
1 - Supply shortages for finished goods and materials as a lag from a 3 month closure of the Chinese indsutrial heartlands.
2 - A new shock to the West as Covid-19 impacts every day life and travel with a potential for a China style shut down for a couple of months.
3 - Saudi Arabia getting tired of the Russian approach to OPEC and decidig now is the time to start an oil war (Oil price fell 33% in one minute overnight) - just as oil demand is dropping due to lack of travel and shipping.
Of the three above, only point one is under control with China starting to get back to work last week. The second point is on a knife edge, as the virus gets into Europe at the end of winter - so much will depend on the weather in the coming weeks.
The oil war should be a shot in the arm to the economy at a desperate time, but as we know it is good for some sectors and terrible for others.
UK Gilts are all negative now, the sign of a real crisis if there ever was one.
We still might see this as an over-reaction and there could be a fast recovery if Governments get a grip on the Virus, but there are few signs of that. UK still, after 2 weeks, had planes landing constantly from Milan for example. EU countries with their endless virtue signalling abou tinclusity and openness do seem to struggle with scenario's like this, as does the USA.
Fun week ahead
The Ftse is now down near 6000, having been at nearly 7500 a few short weeks ago. We started the year quite optimistically thinking getting Brexit Done and Trump pump priming the US economy ahead of an election would make for a strong year.
Now we have 3 simultaenous, but related, crises:
1 - Supply shortages for finished goods and materials as a lag from a 3 month closure of the Chinese indsutrial heartlands.
2 - A new shock to the West as Covid-19 impacts every day life and travel with a potential for a China style shut down for a couple of months.
3 - Saudi Arabia getting tired of the Russian approach to OPEC and decidig now is the time to start an oil war (Oil price fell 33% in one minute overnight) - just as oil demand is dropping due to lack of travel and shipping.
Of the three above, only point one is under control with China starting to get back to work last week. The second point is on a knife edge, as the virus gets into Europe at the end of winter - so much will depend on the weather in the coming weeks.
The oil war should be a shot in the arm to the economy at a desperate time, but as we know it is good for some sectors and terrible for others.
UK Gilts are all negative now, the sign of a real crisis if there ever was one.
We still might see this as an over-reaction and there could be a fast recovery if Governments get a grip on the Virus, but there are few signs of that. UK still, after 2 weeks, had planes landing constantly from Milan for example. EU countries with their endless virtue signalling abou tinclusity and openness do seem to struggle with scenario's like this, as does the USA.
Fun week ahead
Saturday, 7 March 2020
Weekend Reading: They Want Your Pension
In a couple of posts over the past few months (e.g here, here, and here) I've been banging on about how the Entire [Western] World is now effectively locked into "net zero carbon" policy mode; and how in turn the warring forces of (a) capitalism; (b) the Left; (c) the 'green' (but actually world-governmentist) NGOs; (d) the developing world; (e) chancers and kleptocrats of many shades; (f) organised crime ... all see this as a glorious opportunity to engage with / emerge-from-behind-the-smokescreen-of this prospective bonanza of activity to seize the reins of power - and of course the world's pension funds.
Here's an interesting Left specimen for our edification: see "Repurposing asset management and democratising pensions", for example.
Have a nice weekend! And frustration to the Welsh ...
ND
UPDATE: right on cue - Will Hutton, arch NGO-ist, world-governmentist and all-round failure, now wants to jump on the Coronavirus bandwagon for his nasty political ends
Here's an interesting Left specimen for our edification: see "Repurposing asset management and democratising pensions", for example.
Have a nice weekend! And frustration to the Welsh ...
ND
UPDATE: right on cue - Will Hutton, arch NGO-ist, world-governmentist and all-round failure, now wants to jump on the Coronavirus bandwagon for his nasty political ends
Friday, 6 March 2020
Friday Fun - Viral Market Turmoil
How low will the markets go?
In what proved to be a dead cat bounce for a couple of days, it seemed that Global markets had rallied off the lows. I spoke to a few city types who assured me the Hedge funds had closed their shorts and gone long.
But then today has proved another tough day with the FTSE down 3.5% to a new low for the year and Global markets all in risk-off mode?
So for the weekend, where are the markets going to go. Oil is down below $50 a barrel and staying there, will this itself cause a bounce as that has a deflationary effect across the whole world? Will that save airlines (I doubt it)? Will the market carry on witht he FTSE headed toward 5000 and the Dow 20,000?
Or is this all overdone and the bounce back be strong next week?
Interesting times ahead.
In what proved to be a dead cat bounce for a couple of days, it seemed that Global markets had rallied off the lows. I spoke to a few city types who assured me the Hedge funds had closed their shorts and gone long.
But then today has proved another tough day with the FTSE down 3.5% to a new low for the year and Global markets all in risk-off mode?
So for the weekend, where are the markets going to go. Oil is down below $50 a barrel and staying there, will this itself cause a bounce as that has a deflationary effect across the whole world? Will that save airlines (I doubt it)? Will the market carry on witht he FTSE headed toward 5000 and the Dow 20,000?
Or is this all overdone and the bounce back be strong next week?
Interesting times ahead.
Thursday, 5 March 2020
Flymaybe no more
Well, Coronvirus strikes! It has not killed anyone yet int he Uk but has taken a corporate victim. Flybe was in a poor state anyway, needing tax holidays and more investment to try and keep going but the collapse in bookings has done for it.
I hope that there is a chance of a phoenix rising from the ashes to take over the profitable routes (hmm, are there any I wonder) and slots to try and keep the regional air capacity going. However, with the virus about to hit I think this is unlikely and a decision by a Private Equity house would be needed in the next day or two. So sadly, a wind down and sell-off is most likely.
That means the more likely scenario is a bunch of small start up's trying to cherry pick routes and lease planes for the forseeable in the regions - so in the short terms there will be a big undersupply, especially with the virus putting off new entrants.
This may well impact on ariport viability - perhaps here the Government should step into at least help with the costs of mothballing facilities for a a few months until some more services start running again.
In the medium term, trying to be optimisitc, we might find that Flybe's oligopolistic position was the cause of its donwfall. More nimble and smaller suppliers who do not try to create demand but to service it might mean we end up with leaner routes but better services. I can see it being more pricey as after all Flybe was losing money hand over fist as a company so something was wrong with with the financial model (sometimes of course this is just debt loads after long-term mismanagement).
Plus, having flown Flyeb a few times, the abysmal customer experience surely can't be hard to improve on for any new entrant.
It will be interesting to see the capitalist response to the demise of Flybe.
I hope that there is a chance of a phoenix rising from the ashes to take over the profitable routes (hmm, are there any I wonder) and slots to try and keep the regional air capacity going. However, with the virus about to hit I think this is unlikely and a decision by a Private Equity house would be needed in the next day or two. So sadly, a wind down and sell-off is most likely.
That means the more likely scenario is a bunch of small start up's trying to cherry pick routes and lease planes for the forseeable in the regions - so in the short terms there will be a big undersupply, especially with the virus putting off new entrants.
This may well impact on ariport viability - perhaps here the Government should step into at least help with the costs of mothballing facilities for a a few months until some more services start running again.
In the medium term, trying to be optimisitc, we might find that Flybe's oligopolistic position was the cause of its donwfall. More nimble and smaller suppliers who do not try to create demand but to service it might mean we end up with leaner routes but better services. I can see it being more pricey as after all Flybe was losing money hand over fist as a company so something was wrong with with the financial model (sometimes of course this is just debt loads after long-term mismanagement).
Plus, having flown Flyeb a few times, the abysmal customer experience surely can't be hard to improve on for any new entrant.
It will be interesting to see the capitalist response to the demise of Flybe.
Tuesday, 3 March 2020
Let's hope the budget gets cancelled too
Really worried by the kite flying from the new Chancellor.
The Tories are talking about doubling Enterprise taxes to 20% from 10% - what on earth difference will this make to the overall tax income but at the expense of putting off new fintech and other start-ups that we need.
In addition, there is talk of huge spending needs and taxes rises to compensate.
We really don't need tax rises in the UK. Thje inexorable rise in taxation needs to be challenged with some creative thinking. Cutting the 50% tax rate to 45% raised revenues for example. This should be carried further one.
Another kite being flown is a re-working of business rates, this is a better idea but not if it results in a move to Land Value taxes that end up costing everyone - relief is needed for thos under pressure not spreadin the burden more widely amongst the population.
Overall this year all the kites being flown are rubbish and designed to raise revenues rather than relieve tax burdens and drive business spirits. Save us from a Budget please Corona virus!
The Tories are talking about doubling Enterprise taxes to 20% from 10% - what on earth difference will this make to the overall tax income but at the expense of putting off new fintech and other start-ups that we need.
In addition, there is talk of huge spending needs and taxes rises to compensate.
We really don't need tax rises in the UK. Thje inexorable rise in taxation needs to be challenged with some creative thinking. Cutting the 50% tax rate to 45% raised revenues for example. This should be carried further one.
Another kite being flown is a re-working of business rates, this is a better idea but not if it results in a move to Land Value taxes that end up costing everyone - relief is needed for thos under pressure not spreadin the burden more widely amongst the population.
Overall this year all the kites being flown are rubbish and designed to raise revenues rather than relieve tax burdens and drive business spirits. Save us from a Budget please Corona virus!
Friday, 28 February 2020
Mr market has caught the flu
So the FTSE has moved down to near 6500 - a 13% decline in week. Perhaps, as ever things are overdone but the market was last at these levels consistently in 2014 and there was one spike to this level in 2016 - we all know why then.
For myself, well there maybe more posting as there is going to be a lot less business travel in the near future. The content I am seeing from City analysts broadly syas the current phase is likely to last 1 -2 months and to remind everyone that in China, where containment seems to haev worked, the factories and offices are opening again.
A friend of mine in Hong Kong has just gone back to work after five weeks enforced working from home. however, in the West it maybe that we escape or that we don't and have to endure a month or two of China style lock-down. It is hard to tell, hence the market reaction.
Also we should not forget in the wider macro environment China has just printed a couple of hundred billion of new currency, as has Japan. If the West somehow operates on, with higer interest rates we could counter-intuitively see a rush of hot money into Sterling and Sterling assets - again if we start to suffer like Asia, then this money will find a different outlet.
To me too the comparisons to Sars and Bird Flu are worrying - this flue is no more lethal but far more infectious - which seems to be the trend in these cycles. So how much worse could the next one be in 5 to 10 years?
For myself, well there maybe more posting as there is going to be a lot less business travel in the near future. The content I am seeing from City analysts broadly syas the current phase is likely to last 1 -2 months and to remind everyone that in China, where containment seems to haev worked, the factories and offices are opening again.
A friend of mine in Hong Kong has just gone back to work after five weeks enforced working from home. however, in the West it maybe that we escape or that we don't and have to endure a month or two of China style lock-down. It is hard to tell, hence the market reaction.
Also we should not forget in the wider macro environment China has just printed a couple of hundred billion of new currency, as has Japan. If the West somehow operates on, with higer interest rates we could counter-intuitively see a rush of hot money into Sterling and Sterling assets - again if we start to suffer like Asia, then this money will find a different outlet.
To me too the comparisons to Sars and Bird Flu are worrying - this flue is no more lethal but far more infectious - which seems to be the trend in these cycles. So how much worse could the next one be in 5 to 10 years?
Wednesday, 26 February 2020
Corona virus finally breaks through
So the Corona virus has hit the World stock the markets as the bears have exepcted it too for a while.
I have been travelling a lot of late (hence no posts - thanks Nick Drew!) and my twitter and other feeds have long been full of doom-saying Hedge fund managers who have bet bit against the world markets and gone long gold.
They have been rewarded at last with the spread of Corona Virus. Actually, sad as it is the economic hit is already much worse than people realise. China, a huge chunk of the physical global economy in its hands now and much of this has shut down. Electricty demand in China is down by 2% - but this is a big chunk of the industrial output. This will affect supply chains aroudn the world and of course the oil price as demand sinks for energy.
We can only hope that the virus is controlled by the heavy handed approach of the Communist party. other Countries seem less concerned, the Iranian health minister was interviewed on live TV yesterday whilst sick with the virus.
Even, with control, it seems the Virus will push the world into the recession that has been in the works for a long time. Perhaps by bringing it on early it will be less steep than expected, perhaps too a recession will concentrate the minds of the EU and UK on reality of the need for a deal on trade rather than the current round of grandstanding.
Monday, 24 February 2020
"Zero Carbon" and Finance
Anything as big as the "zero carbon" thing is going to have impacts on all fronts - which is rather the point, of course. And while some firms and banks are revelling in the Keynsian decarbonisation / adaptation bonanza (as we've discussed here several times) there are plenty of negatives to be considered - and not just for German diesel manufacturers. If we take the underlying phenomenon at face value, this rather odd article reckons climate change itself will bring about a major recession, or maybe even "the next financial meltdown". Its reasoning isn't too subtle however ("natural disasters pose a threat to businesses"): and being RT it may well have misunderstood the publication it is summarising.
I would, however, be interested to hear from the insurance industry - or maybe I've missed it (anyone got a good link?) - about how 2019-2020 weather etc ranks in their scale of problematic pay-outs, and how many more such years they can handle before rates really start to rise. That could be an effective brake on business development, and once again will cause governments to be leaned upon to socialise the risks, which is becoming a habit - often a lazy habit - across several sectors of late.
My main interest in this area is rather different, however. When engaging with financiers on big projects, I've always been struck by how much weight they put on the tail-end of a projected cashflow stream. In my industry, 15-year finance is pretty much the norm for many classes of big asset, with payback targetted anywhere between 5-10 years. When I first became involved, I was gobsmacked to find the banks demanding projections of project revenues out 40 years! which only makes sense at all for a few assets - most will be finished at around the 25-year mark. OK, a very long-lived asset might be seeking the very cheapest finance, and hence the discount rates being used will be very low ... but 40 years?!
And now, most western governments are positively targetting, and usually "legislating" (FWIW) for epic structural transformations a mere 10-15 years into the future, with further disruptions all the way to 2050. Safe to say, there's virtually no asset, even a nuke or a pipeline with a putative 60 year life, for which serious projections could be made even as far as the magical year 2050. And we don't even need to opine on whether this makes sense, or will succeeed. They're doing it: that's all we need to know.
There are only so may ways this can go.
(1) the banks can admit their prior interest in the tail-years' cashflow was primarily academic, or just for icing the cake, either of which they can forgo if push comes to shove.
(2) with bugger-all visibility of business dynamics beyond 2035, a whole heap of potential projects (particularly "conventional energy") will find their cost of capital rising noticeably, all the way up to prohibitive; and a raft of these projects will simply not fly any more (just as many existing assets will become stranded by related phenomena).
(3) everyone will gang up on governments, demanding (yes, you guessed) the problem be socialised, probably with governments standing directly behind the debt servicing (as the nuke boys have been demanding for years). Everyone will be wanting this privilege for everything that moves, most particularly the ever-widening category of what counts as "green" investment which, as we've pointed out several times in recent months, now encompasses "adaptation" projects (and for leftists, of course, includes projects that are part of the "just transition", = anything they fancy with plenty of unionised jobs involved, see the Labour 2019 manifesto passim).
This whole thing is of course entirely a self-fulfilling problem. Doesn't make it any the less real. You can see why the leftists and nationalisers have their tails up, just as do the putative "war profiteers" among the banks and the engineering companies for slightly different reasons. (And the NGOs, the con artists, the kleptocrats, and doubtless organised criminals too.) They can't all be right. Indeed, as we've said before, they will be fighting it out in the trenches for the rightness of their own, very partial vision of this future. And their hands on the pension funds ...
ND
I would, however, be interested to hear from the insurance industry - or maybe I've missed it (anyone got a good link?) - about how 2019-2020 weather etc ranks in their scale of problematic pay-outs, and how many more such years they can handle before rates really start to rise. That could be an effective brake on business development, and once again will cause governments to be leaned upon to socialise the risks, which is becoming a habit - often a lazy habit - across several sectors of late.
My main interest in this area is rather different, however. When engaging with financiers on big projects, I've always been struck by how much weight they put on the tail-end of a projected cashflow stream. In my industry, 15-year finance is pretty much the norm for many classes of big asset, with payback targetted anywhere between 5-10 years. When I first became involved, I was gobsmacked to find the banks demanding projections of project revenues out 40 years! which only makes sense at all for a few assets - most will be finished at around the 25-year mark. OK, a very long-lived asset might be seeking the very cheapest finance, and hence the discount rates being used will be very low ... but 40 years?!
And now, most western governments are positively targetting, and usually "legislating" (FWIW) for epic structural transformations a mere 10-15 years into the future, with further disruptions all the way to 2050. Safe to say, there's virtually no asset, even a nuke or a pipeline with a putative 60 year life, for which serious projections could be made even as far as the magical year 2050. And we don't even need to opine on whether this makes sense, or will succeeed. They're doing it: that's all we need to know.
There are only so may ways this can go.
(1) the banks can admit their prior interest in the tail-years' cashflow was primarily academic, or just for icing the cake, either of which they can forgo if push comes to shove.
(2) with bugger-all visibility of business dynamics beyond 2035, a whole heap of potential projects (particularly "conventional energy") will find their cost of capital rising noticeably, all the way up to prohibitive; and a raft of these projects will simply not fly any more (just as many existing assets will become stranded by related phenomena).
(3) everyone will gang up on governments, demanding (yes, you guessed) the problem be socialised, probably with governments standing directly behind the debt servicing (as the nuke boys have been demanding for years). Everyone will be wanting this privilege for everything that moves, most particularly the ever-widening category of what counts as "green" investment which, as we've pointed out several times in recent months, now encompasses "adaptation" projects (and for leftists, of course, includes projects that are part of the "just transition", = anything they fancy with plenty of unionised jobs involved, see the Labour 2019 manifesto passim).
This whole thing is of course entirely a self-fulfilling problem. Doesn't make it any the less real. You can see why the leftists and nationalisers have their tails up, just as do the putative "war profiteers" among the banks and the engineering companies for slightly different reasons. (And the NGOs, the con artists, the kleptocrats, and doubtless organised criminals too.) They can't all be right. Indeed, as we've said before, they will be fighting it out in the trenches for the rightness of their own, very partial vision of this future. And their hands on the pension funds ...
ND
Saturday, 22 February 2020
Weekend: Wolf Hall 3, Hurrah!
At last, Hilary Mantel has published! (as we were advised 3 weeks ago by dearieme).
This first-chapter extract suggests we will instantly forget she was ever away. These are among the best political readings you will ever encounter. Roll on 5 March, and let the Book Prizes begin! (We know how it all ends, don't we? - on both counts ...)
ND
This first-chapter extract suggests we will instantly forget she was ever away. These are among the best political readings you will ever encounter. Roll on 5 March, and let the Book Prizes begin! (We know how it all ends, don't we? - on both counts ...)
ND
Monday, 17 February 2020
Those Labour Leadership Candidates
And now they are three. Who's your favourite?
There is a strong element of caricature about Rebecca "Becky" Long-Bailey, leftie geekette par excellence. What an agonisingly careful path she has to tread: not Continuity Corbyn, oh dear me no - and so confident of victory in December she "didn't have her campaign ready to go until January". The bollocks she didn't - she had a very serviceable personal logo in place during the GE campaign itself (some say she was the only Parliamentary candidate to have one - can that be right?), and a website up immediately thereafter (albiet a really poor one). Oh, the ducking and diving over her position on anti-semitism.
Actually there is something very interesting about her, namely that very geekiness she reeks of. In her Shadow Cabinet roles she was responsible for two very large pieces of policy work, both risible but both the product of long hours, many contributors, and much serious attempt to build on convoluted leftist theory. She's very proud of the second - Labour's 2019 "Green Industrial Revolution" policy we've looked at here before. In keeping with all this midnight oil-burning (oh, the CO2 footprint haha!) she's also just published her "worked-out path to power". It is deadly, deadly dull: you could no more summarise it in a couple of catchy bullets than you could their manifesto. (It claims to have "four key elements" but in the ten minutes I was willing to spend reading I couldn't find them!) Hasn't Team Becky learned anything from the 2019 GE? On the other hand, why would we expect them to have learned ...
Kier Starmer was clearly 110% ready at 22:01 hrs on 12 December - probably several months sooner, in fact - and has charted a clear strategic course. Entertainingly, he has decided to outflank Long-Bailey on the left! - e.g. being the only one declining to be labelled a Zionist, and many other carefully-chosen statements besides [see UPDATE below]. He's clearly giving her campaign all manner of headaches. Temperamentally, Lefties would very much prefer to hate him roundly, but they find it very difficult to do so based on his carefully-crafted leadership campaign pronouncements to date: the half-attempts to rubbish him are mostly (a) Brexit and (b) "he surely doesn't believe a word of what he's saying". There are also some subtle attempts to dig out stuff about his time at the CPS, but he's framed his past quite cleverly right from the off.
You could feel quite sorry for Lisa Nandy, who is self-evidently the most genuine person out there, albeit quite muddle-headed on all sorts of issues. Apparently her style is quite winning at the hustings, so perhaps she can look after herself, even if she isn't fronting for a really determined and well-organised power-grab like her two rivals.
This weekend has seen a truly entertaining - and, in its own way, important - new front opening up: are you for bonkers-trans-policy, or against? This one doesn't, I think, fall easily into a left/right divide: by no means all hard-leftists are fervent identitarians, and some proper marxists are strongly anti. (In this way it's a bit like Brexit/Lexit.) Notwithstanding the opportunistic efforts of the bonkers-trans movement to cement a no-compromise, expel-them-all line within Labour (comparable to anti-antisemitism), there can surely be no real prospect of success: but there could be a lot of (red) blood spilled in the process. Since we need the issue properly sorting in the public sphere (while we have Tory idiots like Penny Mordaunt out there), having the arguments thrashed out publicly in the Labour Party (and concommitantly in the Grauniad, where there are voices on both sides, albeit there's much pussyfooting on the sane side) is no bad thing.
For my money, there's the possibility of a neat outcome here. Starmer is making sufficiently good ground that many lefties are having to confront the distinct possibility he can do it. Their fallback position must surely be to capitalise on his leftward thrust by hedging him in with so many "binding" "socialist" commitments, he'll be a properly trussed chicken by the time it's all over. That could unravel in a quite amusing way over the coming years.
Only, errrr, seven weeks to wait!
ND
UPDATE: Starmer is attempting to codify his left-flanking manoeuvre with "10 Pledges". He can't fool Owen Jones!
There is a strong element of caricature about Rebecca "Becky" Long-Bailey, leftie geekette par excellence. What an agonisingly careful path she has to tread: not Continuity Corbyn, oh dear me no - and so confident of victory in December she "didn't have her campaign ready to go until January". The bollocks she didn't - she had a very serviceable personal logo in place during the GE campaign itself (some say she was the only Parliamentary candidate to have one - can that be right?), and a website up immediately thereafter (albiet a really poor one). Oh, the ducking and diving over her position on anti-semitism.
Actually there is something very interesting about her, namely that very geekiness she reeks of. In her Shadow Cabinet roles she was responsible for two very large pieces of policy work, both risible but both the product of long hours, many contributors, and much serious attempt to build on convoluted leftist theory. She's very proud of the second - Labour's 2019 "Green Industrial Revolution" policy we've looked at here before. In keeping with all this midnight oil-burning (oh, the CO2 footprint haha!) she's also just published her "worked-out path to power". It is deadly, deadly dull: you could no more summarise it in a couple of catchy bullets than you could their manifesto. (It claims to have "four key elements" but in the ten minutes I was willing to spend reading I couldn't find them!) Hasn't Team Becky learned anything from the 2019 GE? On the other hand, why would we expect them to have learned ...
Kier Starmer was clearly 110% ready at 22:01 hrs on 12 December - probably several months sooner, in fact - and has charted a clear strategic course. Entertainingly, he has decided to outflank Long-Bailey on the left! - e.g. being the only one declining to be labelled a Zionist, and many other carefully-chosen statements besides [see UPDATE below]. He's clearly giving her campaign all manner of headaches. Temperamentally, Lefties would very much prefer to hate him roundly, but they find it very difficult to do so based on his carefully-crafted leadership campaign pronouncements to date: the half-attempts to rubbish him are mostly (a) Brexit and (b) "he surely doesn't believe a word of what he's saying". There are also some subtle attempts to dig out stuff about his time at the CPS, but he's framed his past quite cleverly right from the off.
You could feel quite sorry for Lisa Nandy, who is self-evidently the most genuine person out there, albeit quite muddle-headed on all sorts of issues. Apparently her style is quite winning at the hustings, so perhaps she can look after herself, even if she isn't fronting for a really determined and well-organised power-grab like her two rivals.
This weekend has seen a truly entertaining - and, in its own way, important - new front opening up: are you for bonkers-trans-policy, or against? This one doesn't, I think, fall easily into a left/right divide: by no means all hard-leftists are fervent identitarians, and some proper marxists are strongly anti. (In this way it's a bit like Brexit/Lexit.) Notwithstanding the opportunistic efforts of the bonkers-trans movement to cement a no-compromise, expel-them-all line within Labour (comparable to anti-antisemitism), there can surely be no real prospect of success: but there could be a lot of (red) blood spilled in the process. Since we need the issue properly sorting in the public sphere (while we have Tory idiots like Penny Mordaunt out there), having the arguments thrashed out publicly in the Labour Party (and concommitantly in the Grauniad, where there are voices on both sides, albeit there's much pussyfooting on the sane side) is no bad thing.
* * * * *
What's an outsider to think? I can't imagine Tories are flocking to join Labour in order to vote for RL-B, as many claim to have done for Corbyn in 2015. All in all, I'm guessing Nandy just doesn't have the requisite voting-bloc and that it's down to Starmer in a desperate race to corner enough leftist votes to short-circuit RL-B's apparent heir-to-Corbyn advantage. In his favour: the decisive strategy; evident ruthlessness (which is both functionally useful, and attractive to people looking for a winner); and the fact that he's apparently considered papabile. (Plus, perhaps everyone knows he doesn't mean a word of it!) Against? Well, he's not a woman, which is clearly being played for all it's worth.For my money, there's the possibility of a neat outcome here. Starmer is making sufficiently good ground that many lefties are having to confront the distinct possibility he can do it. Their fallback position must surely be to capitalise on his leftward thrust by hedging him in with so many "binding" "socialist" commitments, he'll be a properly trussed chicken by the time it's all over. That could unravel in a quite amusing way over the coming years.
Only, errrr, seven weeks to wait!
ND
UPDATE: Starmer is attempting to codify his left-flanking manoeuvre with "10 Pledges". He can't fool Owen Jones!
Thursday, 13 February 2020
China: an Update
So, continuing our watching brief through the lens of the virus, and with the same caveats as before, how are things panning out?
Badly for China, I'd say. Early gushing approbation from the WHO worthies has subsided just a bit, notwithstanding the Chinese Ambassador to the Court of St James feeling able to harangue us for our insolent ingratitude (you can easily imagine the tone they hope to be able to employ a few years down the road whenever the fancy takes them ... or perhaps that's hoped). And they've definitely achieved promulgation of a meme that says any aspersions are racist - a meme that finds receptive carriers on the left, of course.
On the other hand.
The Chinese people are evidently getting restless, as well they might. It didn't take Peter Mandelson to advise Xi to keep his head down (though he probably did, with invoice in the post), but Xi will struggle to avoid opprobrium. Notable is this fine, brave essay which will probably cost the author dearly. Less eloquent people in their millions will probably be thinking parallel thoughts; and "when fury overcomes fear..." well, who knows? There have been rumblings about other disasters in the past, but perhaps this is the Big One. It will be if it triggers a serious economic downturn coupled with a drying-up of trade - the very thing the CP fears most. (What price a favourable trade deal soon, eh?)
There's another strand to this: the reaction in Hong Kong. When I was last there, a couple of years ago, I was a bit surprised to hear strident admonitions over the tannoy in various public places: "Use your handkerchief when you spit!", and "Do not urinate in the street!". I was told these are occasioned by the reprehensible habits of "foreigners", by which is meant mainland Chinese. Increased tension - from an already heightened level - is only to be expected.
So we watch and wait and hope for various developments that might, in the long run, be for the greater good. It has to be said, though, any week now we may get the answers to the dread questions being whispered nervously: why no news of the virus from the sub-continent? And why none from Africa? But we all think we know, really. And that may truly take the heat off Xi altogether.
ND
Badly for China, I'd say. Early gushing approbation from the WHO worthies has subsided just a bit, notwithstanding the Chinese Ambassador to the Court of St James feeling able to harangue us for our insolent ingratitude (you can easily imagine the tone they hope to be able to employ a few years down the road whenever the fancy takes them ... or perhaps that's hoped). And they've definitely achieved promulgation of a meme that says any aspersions are racist - a meme that finds receptive carriers on the left, of course.
On the other hand.
The Chinese people are evidently getting restless, as well they might. It didn't take Peter Mandelson to advise Xi to keep his head down (though he probably did, with invoice in the post), but Xi will struggle to avoid opprobrium. Notable is this fine, brave essay which will probably cost the author dearly. Less eloquent people in their millions will probably be thinking parallel thoughts; and "when fury overcomes fear..." well, who knows? There have been rumblings about other disasters in the past, but perhaps this is the Big One. It will be if it triggers a serious economic downturn coupled with a drying-up of trade - the very thing the CP fears most. (What price a favourable trade deal soon, eh?)
There's another strand to this: the reaction in Hong Kong. When I was last there, a couple of years ago, I was a bit surprised to hear strident admonitions over the tannoy in various public places: "Use your handkerchief when you spit!", and "Do not urinate in the street!". I was told these are occasioned by the reprehensible habits of "foreigners", by which is meant mainland Chinese. Increased tension - from an already heightened level - is only to be expected.
So we watch and wait and hope for various developments that might, in the long run, be for the greater good. It has to be said, though, any week now we may get the answers to the dread questions being whispered nervously: why no news of the virus from the sub-continent? And why none from Africa? But we all think we know, really. And that may truly take the heat off Xi altogether.
ND
Monday, 10 February 2020
Centrica: Tough Times, Hanging In
Centrica is a company we perennially find interesting, for a couple of reasons. They've successfully remained UK-owned, which many of their energy-sector peers haven't; their strategies have generally been noteworthy, indeed often quite smart - which kinda relates to the first point; and it's rarely been plain sailing for them - which comes with the territory.
They're yet again at an awkward juncture, needing a new CEO and some substantial asset sales, both to manage their debt and, frankly, to exit from a couple of increasingly difficult sectors - upstream oil & gas production and nuclear power, neither of which are flavour of the month for investors.
Nuclear? Yes, it's easy to forget they took a 20% stake in the old British Energy nuke fleet from EDF back in 2009, which didn't look so clever a short while later - so much so, they've never been able to shift it. Why did they do it? A couple of ostensible reasons: it was a package deal in which they offloaded some unwanted Belgian assets; and they thought of the nuclear electricity as both green(ish) and "a hedge against the vagaries of global commodity prices". There was another (unstated) reason, too: in the 2000's they had very fairly made a bit of a name for opportunistically picking up big assets at distressed prices - several gas-fired power plants, a big gas storage facility and a huge tranche of electricity from BE - judging the bottom of the market very adroitly. By 2009 they were just too pleased with themselves, and thought they could do no wrong.
Seems a long time ago now. But they've stuck to their core strategy - excelling (well, doing OK) at retail energy as that sector gets more and more difficult, on a last-man-standing thesis. Seeing weak hands all around them amongst both the Big 6 and the plethora of failing minnows we've talked about recently, they probably still reckon they made the correct bet there. Even the burgeoning Ovos and Octopuses of this world aren't finding everything quite as straightforward as they hoped. With the threat of asset-seizure under a Labour Government gone, and nobody likely to object about an energy retailer doing a steady job (Big-6 or not), Centrica will probably stick with this.
They still need those asset sales, though. Nuclear is a mug's game - particularly being strapped to EDF, whom we'll look at in another post.
ND
They're yet again at an awkward juncture, needing a new CEO and some substantial asset sales, both to manage their debt and, frankly, to exit from a couple of increasingly difficult sectors - upstream oil & gas production and nuclear power, neither of which are flavour of the month for investors.
Nuclear? Yes, it's easy to forget they took a 20% stake in the old British Energy nuke fleet from EDF back in 2009, which didn't look so clever a short while later - so much so, they've never been able to shift it. Why did they do it? A couple of ostensible reasons: it was a package deal in which they offloaded some unwanted Belgian assets; and they thought of the nuclear electricity as both green(ish) and "a hedge against the vagaries of global commodity prices". There was another (unstated) reason, too: in the 2000's they had very fairly made a bit of a name for opportunistically picking up big assets at distressed prices - several gas-fired power plants, a big gas storage facility and a huge tranche of electricity from BE - judging the bottom of the market very adroitly. By 2009 they were just too pleased with themselves, and thought they could do no wrong.
Seems a long time ago now. But they've stuck to their core strategy - excelling (well, doing OK) at retail energy as that sector gets more and more difficult, on a last-man-standing thesis. Seeing weak hands all around them amongst both the Big 6 and the plethora of failing minnows we've talked about recently, they probably still reckon they made the correct bet there. Even the burgeoning Ovos and Octopuses of this world aren't finding everything quite as straightforward as they hoped. With the threat of asset-seizure under a Labour Government gone, and nobody likely to object about an energy retailer doing a steady job (Big-6 or not), Centrica will probably stick with this.
They still need those asset sales, though. Nuclear is a mug's game - particularly being strapped to EDF, whom we'll look at in another post.
ND
Friday, 7 February 2020
Down with the BBC
There is a huge wave of media comment at the moment, mostly led by BBC journalists and workers (not that they admit this on Twitter etc), trying to defend the BBC license fee.
The new Government is they fear looking at the viability of the BBC and correcting the wrong of making it a jailing offence to not pay the annual licence fee.
As Capitalists, I have long detested the monopoly of the BBC. The government has in effect subsidies tv and radio in this country by force. A by-product has been historically a higher quality output than most countries, but at a price of forcing hundreds of people to go to jail every year.
In 2020 this can no longer be even slightly justified. Hollywood is being outcompetes by the likes of Netflix and Amazon. Quality TV is available in the market to buy at a reasonable price. The BBC gave up on live sports so we are all used to paying for that or choosing not to now.
There is no moral stance in forcing people to pay for the BBC. However once the government reduces the jail threat, there will be hundreds of thousands more non-payers and the model will collapse.
Hence the campaign now. Sadly for the BBC too the only public service elements like News have also been compromised in our new partisan era. If the Government does want to subsidise news for the general good it could auction this off to the already numerous providers in the market.
My hope though is that the end is nigh for this regressive and unnecessary tax.
The new Government is they fear looking at the viability of the BBC and correcting the wrong of making it a jailing offence to not pay the annual licence fee.
As Capitalists, I have long detested the monopoly of the BBC. The government has in effect subsidies tv and radio in this country by force. A by-product has been historically a higher quality output than most countries, but at a price of forcing hundreds of people to go to jail every year.
In 2020 this can no longer be even slightly justified. Hollywood is being outcompetes by the likes of Netflix and Amazon. Quality TV is available in the market to buy at a reasonable price. The BBC gave up on live sports so we are all used to paying for that or choosing not to now.
There is no moral stance in forcing people to pay for the BBC. However once the government reduces the jail threat, there will be hundreds of thousands more non-payers and the model will collapse.
Hence the campaign now. Sadly for the BBC too the only public service elements like News have also been compromised in our new partisan era. If the Government does want to subsidise news for the general good it could auction this off to the already numerous providers in the market.
My hope though is that the end is nigh for this regressive and unnecessary tax.
Tuesday, 4 February 2020
Boris the Dealmaker
Can I strongly recommend watching Boris' Greenwich speech? For a politician, it's truly excellent: he really does have the makings of a statesman That's the way to give clarity of purpose to your negotiators: it immeasurably strengthens their hand. Many have bemoaned the UK team's lame performances under Cameron (his pre-referendum "Deal") and then May, in the face of perfectly ordinary Euro-wallah opponents - who were competent, but no more. Shamefully, that has been quite enough to wipe the floor with our side.
It would be a singularly inept negotiator who couldn't make serious headway under the Colours that Johnson has issued to the troops. He's won half the battle for them already. How? He's trumped the Euros at their own game, by equiping our side with a knock-down "Logic". Because "Logic" wins negotiations. As an old negotiator, let me explain.
An army acquaintance of mine was about to leave the service after 25 years: he'd never known anything else. He had an attractive skill-set, and found no difficulty in getting interviews for jobs he knew he could do. But he was finding a problem: as a chap in middle life with loads of experience, he wasn't being considered for bog-standard entry-level jobs with a defined pay band: he was being asked to name what salary he wanted. Formal negotiating wasn't something he knew anything about, so how the hell did he proceed, on this simplest of early challenges?
I told him to make a cost-list of everything he could think of that a respectable family man could reasonably expect to spend over a year maintaining a decent lifestyle - housing, transport, food, holidays, education, entertainment, insurance, etc etc. Comprehensive: everything he could put a name to and stand by it without embarrassment if questioned in detail. Add it all up, then add 10% plus rounding. Then, when questioned, say calmly & firmly: I've totted it all up and I need £x. Then stay silent, calmly awaiting a repsonse.
It worked for him. It generally does. Why? Because it comes across as a "Logic": (a) because it is indeed fairly based on a genuine logic, albeit one capable of being wrangled with by a particularly quarrelsome antagonist; and (b) because it's presented calmly and with finality - as if the presenter truly believes in its logic, and won't be shaken on it. Any type of vagueness or flimsiness or randomness invites strong push-back. But anything that seems to be believed ("seems" is all you need, though it really must seem!) as a matter of fact or logic, invites being accepted. Even if the other side is inclined to say: well that's not right - they find it hard to press on that with ultimate conviction if, at the same time, they have to admit: well, but he believes it, he's clearly not going to budge, whatever we think ...
It's only one of a hundred negotiating tactics; but the Euro-wallahs played this with great success on Mrs May. This is sequence the negotiations must take, because of X and Y. This is the bill the UK must pay, because of A and B. This is why the Irish issue must be addressed first, because of the Good Friday Agreement. Barnier played this card all day long, for months at a time. And May was taken in by it, every time.
They were limbering up to play it all over again. These are the rules you (obviously!) must accept, because you want access to our markets. They've even got a standard embellishment, which they used last time and Barnier explicitly said they were going to use again: it's up to you (oh, it sounds so reasonable! It's "Logic", after all ...) - you decide what you want from us, and we'll tell you the price-tag: the more items you want, the longer you're going to have to be in talks, and the more of our rules you're (obviously) going to have to accept.
Boris has thwarted the whole trick with two simple observations: our standards [environmental, workplace benefits etc etc - listen to the speech] are higher than yours (we set them higher because of our own superior policies); and we could demand you level up to us - but we're not going to; we'll just have mutual free trade, thank you. It's simple: it's robust: the point has now been made publicly: everyone on our side can easily rehearse it all day long (and would have a helluva problem going home to explain any backsliding on such a straightforward point).
It can't be screwed up - can it?
Anyhow: Field Marshal Boris has magnificently played his part, conveying his battle orders with clarity and impeccable knock-down Logic. Let battle commence.
ND
It would be a singularly inept negotiator who couldn't make serious headway under the Colours that Johnson has issued to the troops. He's won half the battle for them already. How? He's trumped the Euros at their own game, by equiping our side with a knock-down "Logic". Because "Logic" wins negotiations. As an old negotiator, let me explain.
An army acquaintance of mine was about to leave the service after 25 years: he'd never known anything else. He had an attractive skill-set, and found no difficulty in getting interviews for jobs he knew he could do. But he was finding a problem: as a chap in middle life with loads of experience, he wasn't being considered for bog-standard entry-level jobs with a defined pay band: he was being asked to name what salary he wanted. Formal negotiating wasn't something he knew anything about, so how the hell did he proceed, on this simplest of early challenges?
I told him to make a cost-list of everything he could think of that a respectable family man could reasonably expect to spend over a year maintaining a decent lifestyle - housing, transport, food, holidays, education, entertainment, insurance, etc etc. Comprehensive: everything he could put a name to and stand by it without embarrassment if questioned in detail. Add it all up, then add 10% plus rounding. Then, when questioned, say calmly & firmly: I've totted it all up and I need £x. Then stay silent, calmly awaiting a repsonse.
It worked for him. It generally does. Why? Because it comes across as a "Logic": (a) because it is indeed fairly based on a genuine logic, albeit one capable of being wrangled with by a particularly quarrelsome antagonist; and (b) because it's presented calmly and with finality - as if the presenter truly believes in its logic, and won't be shaken on it. Any type of vagueness or flimsiness or randomness invites strong push-back. But anything that seems to be believed ("seems" is all you need, though it really must seem!) as a matter of fact or logic, invites being accepted. Even if the other side is inclined to say: well that's not right - they find it hard to press on that with ultimate conviction if, at the same time, they have to admit: well, but he believes it, he's clearly not going to budge, whatever we think ...
It's only one of a hundred negotiating tactics; but the Euro-wallahs played this with great success on Mrs May. This is sequence the negotiations must take, because of X and Y. This is the bill the UK must pay, because of A and B. This is why the Irish issue must be addressed first, because of the Good Friday Agreement. Barnier played this card all day long, for months at a time. And May was taken in by it, every time.
They were limbering up to play it all over again. These are the rules you (obviously!) must accept, because you want access to our markets. They've even got a standard embellishment, which they used last time and Barnier explicitly said they were going to use again: it's up to you (oh, it sounds so reasonable! It's "Logic", after all ...) - you decide what you want from us, and we'll tell you the price-tag: the more items you want, the longer you're going to have to be in talks, and the more of our rules you're (obviously) going to have to accept.
Boris has thwarted the whole trick with two simple observations: our standards [environmental, workplace benefits etc etc - listen to the speech] are higher than yours (we set them higher because of our own superior policies); and we could demand you level up to us - but we're not going to; we'll just have mutual free trade, thank you. It's simple: it's robust: the point has now been made publicly: everyone on our side can easily rehearse it all day long (and would have a helluva problem going home to explain any backsliding on such a straightforward point).
It can't be screwed up - can it?
Anyhow: Field Marshal Boris has magnificently played his part, conveying his battle orders with clarity and impeccable knock-down Logic. Let battle commence.
ND
Monday, 3 February 2020
More terror inspired attempted murder on the streets of London
There is not much to add to the sum of insight on yet another horribel attack over the weekend. The police clearly knew this guy was a big risk and it looks indeed llike they were actually trying to stop him before he started his attack. Sadly, not quite soon enough but at least they sent on with best wishes to his next life.
One recent peice of information I have had though is in discussions with many people living or working in Saudi. There King Salman is starting a difficult process of change, loosening up the laws where possible to allow music to be played and women to drive; putting in place plans for mass toursim and even looking to legalise alcohol sales in the coutnry.
Clearly, none of this is very popular with the religous police and Wahhabist clerics. Yet being an authoritarian police state is quite handy in these circumstances as the most 'devout' of these have been sent to live abroad now so as not to interfere witth the reforms at home.
However, their favoured destinations are apparetnly London and Birmingham. So a repeat of the 'Londonistan' issues of the 1990's abounds. Lots of religous crazies living here in freedom having been expelled from countries where seen as to extreme.
I note of late we have more islamic inspired knife killings in London and ridiculous protests about sex education outside schools in Birmingham. I suspect a link here and I reall hope the Home Secretarty will leanr their lessons and stop granting visas and asylum to these rabble rousers.
One recent peice of information I have had though is in discussions with many people living or working in Saudi. There King Salman is starting a difficult process of change, loosening up the laws where possible to allow music to be played and women to drive; putting in place plans for mass toursim and even looking to legalise alcohol sales in the coutnry.
Clearly, none of this is very popular with the religous police and Wahhabist clerics. Yet being an authoritarian police state is quite handy in these circumstances as the most 'devout' of these have been sent to live abroad now so as not to interfere witth the reforms at home.
However, their favoured destinations are apparetnly London and Birmingham. So a repeat of the 'Londonistan' issues of the 1990's abounds. Lots of religous crazies living here in freedom having been expelled from countries where seen as to extreme.
I note of late we have more islamic inspired knife killings in London and ridiculous protests about sex education outside schools in Birmingham. I suspect a link here and I reall hope the Home Secretarty will leanr their lessons and stop granting visas and asylum to these rabble rousers.
Sunday, 2 February 2020
Book review: This Is NOT Propaganda / Peter Pomerantsev
This odd book addresses one of the key sources of political angst today: fake news / post-truth / soft facts, “the war against reality” etc etc, by someone who’s apparently an expert, Peter Pomerantsev. He’s required reading in the Foreign Office, I’m told.
I say he addresses the issue, but that’s not quite right: he tees it up. He gives detailed accounts of troll factories in Russia (where, we’re told, it all started), and chilling examples of professional and often deeply malicious fake-news merchants at work across the globe; in the Philippines, Bahrain, Turkey, Venezuela, Serbia, Mexico, Estonia, Ukraine (a particularly long section of the book - “The Most Amazing Information Warfare Blitzkrieg In History”), ISIS recruiting, Aleppo and the “White Helmets” … oh, and of course Cambridge Analytica and another rollcall of countries where they’ve been active. (Just a leetle bit on the USA and UK, and likewise a very small amount on China – which seems like a bit of a cop-out. Still, we ain’t seen nothing like the Philippines or Ukraine, that’s for sure.)
This, he says, is the future: and “the future arrived first in Russia”, for reasons he expounds. His parents, incidentally, were Russian dissidents who suffered for their devotion to the truth (the absolute truth?) before being deported / allowed to leave. (See, we never quite know what’s what, do we … and then his father started working for the BBC World Service, during the Cold War era …) But basically, he’s trying to warn, to horrify, to shock-and-awe us: "part memoir, part investigation, part cry for help", says the Grauniad. He’s apparently much in demand all over the world for his talks on these topics.
It’s all very odd because some of the practitioners of these dark arts, he seems to approve of! – or at least, the causes they are promoting. Fighting fire with fire? Does he have any remedies? There’s a chapter near the end called “Conclusions and Recommendations” but that turns out to be fake, too – he doesn’t have any. Which is pretty unusual for a published book: publishers tend to insist on more than just a litany of woes.
This, then, is a book for anyone who doesn’t feel sufficiently perturbed by what’s going on. Personally I feel it’s a huge worry, not least for people like myself who have a high, conservative regard for absolute, objective truth (“Realism” in philosophical parlance), whilst recognizing the importance of differing perspectives. I take that to be, broadly, a Right-leaning position. Funnily enough, though, my reading of the many angst-ridden post-election leftist tracts around at the moment suggests many on the Left feel the horror even more acutely - which, up to a point, does them credit. Maybe they’d be less concerned if they’d won the election? Perhaps fake news is a convenient excuse for any political failure these days. And perhaps the Left is even more prone to fret because of their self-defined “rationality” (vs conservative / nationalist emotionalism) and their confidence that, logic being on their side, it can only be disinformation etc that deprives them of electoral success. Plus the usual leftist willingness to believe any evil of their opponents.
Or maybe it’s all just fine provided that our fake-news peddlers prevail against theirs. As indicated above, there is a hint that Pomerantsev sometimes feels that way.
Three more disparate thoughts:
1. It’s a shockingly badly written book – a real pain to read, but the content was sufficiently riveting to drag me through. Nothing, incidentally, to do with English not being his native language, because it is. It’s stylistic. Aren’t there editors?
2. While 21st century methods (particularly the near-universal social meejah) are revolutionary, the underlying truth-dodging, fact-swerving techniques are not. Proselytistng religions deploy them all the time, and always have - as Pomerantsev's chapter on ISIS and counter-ISIS makes clear. Nietzsche tells us that, although the Will to Truth may be strong (as scientists would profess), the Will to Power is stronger.
3. If you want something beautifully written that explores the same subject matter, Hilary Mantel is your woman. Although we’ve only had parts 1 and 2 of Wolf Hall, one of the key themes (as I read it) is how facts and events become distorted in the public register, often as soon as they have happened: some kind of spin – purposeful or otherwise – takes hold straight away. (There’s a lovely example, insignificant in terms of the formal plot and therefore significant for its being in the story, of something Cromwell does on his travels. By the time he returns home, just a day or so later, he finds a distorted version of what transpired is already current within his household.)
When is Mantel going to give us Volume 3? She’s been hatching it for an unconscionable amount of time! Quite soon, apparently: and then we can get back to considering these troubling issues in a calm and literate fashion. Unless we're lefties, of course, or living in Ukraine.
ND
UPDATE: further to the blame-it-on-fake-news theme, there's this out today:
I say he addresses the issue, but that’s not quite right: he tees it up. He gives detailed accounts of troll factories in Russia (where, we’re told, it all started), and chilling examples of professional and often deeply malicious fake-news merchants at work across the globe; in the Philippines, Bahrain, Turkey, Venezuela, Serbia, Mexico, Estonia, Ukraine (a particularly long section of the book - “The Most Amazing Information Warfare Blitzkrieg In History”), ISIS recruiting, Aleppo and the “White Helmets” … oh, and of course Cambridge Analytica and another rollcall of countries where they’ve been active. (Just a leetle bit on the USA and UK, and likewise a very small amount on China – which seems like a bit of a cop-out. Still, we ain’t seen nothing like the Philippines or Ukraine, that’s for sure.)
This, he says, is the future: and “the future arrived first in Russia”, for reasons he expounds. His parents, incidentally, were Russian dissidents who suffered for their devotion to the truth (the absolute truth?) before being deported / allowed to leave. (See, we never quite know what’s what, do we … and then his father started working for the BBC World Service, during the Cold War era …) But basically, he’s trying to warn, to horrify, to shock-and-awe us: "part memoir, part investigation, part cry for help", says the Grauniad. He’s apparently much in demand all over the world for his talks on these topics.
It’s all very odd because some of the practitioners of these dark arts, he seems to approve of! – or at least, the causes they are promoting. Fighting fire with fire? Does he have any remedies? There’s a chapter near the end called “Conclusions and Recommendations” but that turns out to be fake, too – he doesn’t have any. Which is pretty unusual for a published book: publishers tend to insist on more than just a litany of woes.
This, then, is a book for anyone who doesn’t feel sufficiently perturbed by what’s going on. Personally I feel it’s a huge worry, not least for people like myself who have a high, conservative regard for absolute, objective truth (“Realism” in philosophical parlance), whilst recognizing the importance of differing perspectives. I take that to be, broadly, a Right-leaning position. Funnily enough, though, my reading of the many angst-ridden post-election leftist tracts around at the moment suggests many on the Left feel the horror even more acutely - which, up to a point, does them credit. Maybe they’d be less concerned if they’d won the election? Perhaps fake news is a convenient excuse for any political failure these days. And perhaps the Left is even more prone to fret because of their self-defined “rationality” (vs conservative / nationalist emotionalism) and their confidence that, logic being on their side, it can only be disinformation etc that deprives them of electoral success. Plus the usual leftist willingness to believe any evil of their opponents.
Or maybe it’s all just fine provided that our fake-news peddlers prevail against theirs. As indicated above, there is a hint that Pomerantsev sometimes feels that way.
Three more disparate thoughts:
1. It’s a shockingly badly written book – a real pain to read, but the content was sufficiently riveting to drag me through. Nothing, incidentally, to do with English not being his native language, because it is. It’s stylistic. Aren’t there editors?
2. While 21st century methods (particularly the near-universal social meejah) are revolutionary, the underlying truth-dodging, fact-swerving techniques are not. Proselytistng religions deploy them all the time, and always have - as Pomerantsev's chapter on ISIS and counter-ISIS makes clear. Nietzsche tells us that, although the Will to Truth may be strong (as scientists would profess), the Will to Power is stronger.
3. If you want something beautifully written that explores the same subject matter, Hilary Mantel is your woman. Although we’ve only had parts 1 and 2 of Wolf Hall, one of the key themes (as I read it) is how facts and events become distorted in the public register, often as soon as they have happened: some kind of spin – purposeful or otherwise – takes hold straight away. (There’s a lovely example, insignificant in terms of the formal plot and therefore significant for its being in the story, of something Cromwell does on his travels. By the time he returns home, just a day or so later, he finds a distorted version of what transpired is already current within his household.)
When is Mantel going to give us Volume 3? She’s been hatching it for an unconscionable amount of time! Quite soon, apparently: and then we can get back to considering these troubling issues in a calm and literate fashion. Unless we're lefties, of course, or living in Ukraine.
ND
UPDATE: further to the blame-it-on-fake-news theme, there's this out today:
Almost a quarter of Labour members – 23% – appear to hold what they see as an inherently biased media (both print and broadcast) most responsible for the party’s defeat – or as one put it: “Tory funded MSM lies and misleading articles and campaigns along with daily lies and propaganda on Tory owned main TV channels starting with the BBC!”.
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