Friday, 20 December 2013

Income is meaningless

The analysis of political issues in terms of “income” quartiles can get pretty misleading. A married couple where dad earns £65,000 a year and mum works part time bringing home £15,000 a year is in the fourth quartile of the income distribution. A 70 year-old widower whose £2 million in savings bring him an annual income of approximately £80,000 is also in the fourth quartile. But their policy-relevant economic interests are unlikely to have very much in common since in reality their financial situations are entirely dissimilar.

Let us take this a step further.

Suppose the old guy with £2 million earned £200,000/year for 40 years, and was a high saver. Suppose his twin brother had the exact same income, but spent all his money. The twin brother lives on Social Security. Who is better off? Neither. Both had the same lifetime wage income, and hence equal resources.  Economists take a “lifetime consumption” perspective. The only difference between these brothers is one chose to spend the money when young and the other chose to spend it when old. It is as if one lived by himself in a house and the other lived with roommates in an apartment. No sensible person would say you are better off [than someone who chooses to live alone] because you share an apartment with others and thus pay less rent. These are consumption CHOICES.

The guy with £2 million has already been fully taxed on that wealth, and should of course pay no tax on his capital income. That is why smart progressives like an American called Yglesias favour progressive consumption taxes, at least where it’s possible to clearly identify and separate wage and capital income, as with someone surviving on their 401k mutual funds.

In all probability the guy with £80,000 in retirement income earned far more wage income when younger than the hypothetical family discussed by Yglesias, where each member made an average of £40,000/year. So on utilitarian grounds he should have paid a higher rate of wage tax during his earning years than the hypothetical family making a total of £80,000 in wage income.

So how does a government decide on taxes?

Thursday, 19 December 2013


Vince Cable has said he does not think banning zero hour contracts is a solution.

"A growing number of employers and individuals today are using zero hour contracts," Cable said. While for many people they offer a welcome flexibility to accommodate childcare or top up monthly earnings, for others it is clear that there has been evidence of abuse around this type of employment which can offer limited employment rights and job security.

He went on to say  "Our research this summer gave us a much needed insight into both the positive and negative aspects of zero hours contracts. Our consultation will now focus on tackling the key concerns that were raised, such as exclusivity clauses and how to provide workers with more protection.”

Employers need flexible workforces and people should have the choice in how they work. But this should not be at the expense of fairness and transparency.

John Wastnage, head of employment at the British Chambers of Commerce, said: "Zero hours contracts are valued by many workers and employers, but there is not a clear definition of what they are or how they should work.”

Alexander Ehmann of the Institute of Directors, said: "The IoD is pleased that the Government has recognised the important contribution that zero hours contracts have made in keeping people in employment and offering flexible ways for employers to manage fluctuations in demand.”

However, the growth of zero hours contracts is one of the reasons why so many hard-working people are fearful for their jobs and struggling to make ends meet, in spite of the recovery. But while the Government has identified some of the problems faced by those with zero job security, it is desperately short on solutions to curb the use of these contracts. It is regrettable that the Government is not outlawing the use of zero hour contracts even though it admits there is abuse.

this blog might stop as Google has fucked up connectivity again...

Tuesday, 17 December 2013

Food banks are not getting enough coverage

Cuts to benefits have pushed thousands of families to the edge, not just a few, thousands! Welfare needs to be paid on the basis of need, not within some artificial limit.

Food bank use in south east England, the region known for its wealth and relative prosperity, my home, is up over 60% this year and thousands of families face the prospect of relying on emergency food handouts this Christmas. A decade ago, food banks were almost unheard of in this area but there are now 59 across the region.

We know this thanks to a report from Green MEP Keith Taylor, who’s released ‘Hungry Christmas‘, a report into the spread of food banks in his region. The report is published ahead of a debate on food banks in Parliament on Thursday, which came after the public demonstrated its understanding of the issue, with more than 100,000 people signing a petition on the subject within four days, possibly a record for the official government site. A group of public health experts have concluded that the rate of food poverty in Britain should be classed as a medical emergency.

As this report highlights, three new food banks are set up every week to help meet demand. Cuts to benefits such as housing benefit, child benefit and council tax benefit have pushed people to the edge. Increasing use of unreasonable sanctions that leave already desperate households with no income at all, force them to turn to charity. But the rise of food banks is not just a result of government’s welfare policies, but it does show how welfare cuts are a critical part of the process, and that’s certainly what Keith’s report demonstrates for this one region.

A living wage is a salary people can live on, feed themselves and their children. It would give people back some control over their lives and the ability to plan for the future rather than live a hand to mouth existence. Now that really would be a Merry Christmas.

Monday, 16 December 2013

British Aid

There have been several instances recently where who we give aid to has risen the odd eyebrow, however, the Daily Mail has shown that we are still giving China millions of pounds every year in aid when we also see they have just successfully landed a spaceship on the surface of the moon.

While I have no reason to dampen the achievement they have made, I am surprised that we feel we NEED to continue to send millions of pounds required by Britons half way across the world to China which currently happens to be the second largest power in the world.

Are our politicians really that fucking stupid?

Sunday, 15 December 2013

Solving game problems

In 1913 French mathematician Émile Borel proposed the infinite monkey theorem: A monkey hitting keys at random on a typewriter keyboard for an infinite amount of time will almost surely type a given text, such as the complete works of William Shakespeare. Now while there is a certain resemblance to the internet :), collective problem solving on the internet works in fact much better than randomly hitting keys. While an individual player might be solving a problem in a game by trial and error, he can then exchange the results with others via various internet platforms, either in written or video form. With many people collaborating to solve a game problem by exchanging what works and doesn't work, the speed of problem solving becomes a lot faster than infinite.

That does have repercussions on game design. If you have a puzzle in your game, you not only need to think about how different players might have different skills to solve your puzzle, but also take into account that some will tend to try to solve it alone, while others will look up the solution before even having seen the puzzle. But even more striking is the effect of collaborative problem solving on game balance. If your game has an optimum path, players will find it through collaboration.

I was thinking about it when reading various blog posts about Hearthstone. I played a lot of Magic the Gathering in paper and online form in its time, and Magic the Gathering was reasonably well balanced: While at any given expansion a certain deck might be found to be "the best" of a specific play style, there was always a stone-paper-scissors meta-game in which one play style would do well against another, but lose against a third. And I am not certain that Hearthstone has that stone-paper-scissors meta-game, because the little I have watched of it so far shows it to be a much simpler game than Magic. It is also a CCG [collectable card game] not a TCG [trading card game].

Now of course it is hard to judge from excited blog posts about one deck being completely overpowered to judge the actual state of the game. But to me it seems that Hearthstone is more likely to "get solved", that is an optimum deck found for any given set of cards. While every expansion or nerf then changes that optimum, once the fundamentals are understood, the collective problem solving will find the new optimum while the changes are still on the test server. It is quite likely that the release version of Hearthstone will "get solved" before even leaving the beta. That will affect the game's longevity.

At the very least some cards will be found to be better than other cards. So while the game pretends to have a certain number of different cards, those in the know will work with a much smaller card pool. And those who absolutely want to win will have to spend more money to get sufficient numbers of that smaller, better card pool, because suboptimal cards keep popping up in the booster packs they open. It is not possible to have 600+ cards all with the same power, and I hope that too much tinkering does not spoil the final game.

Friday, 13 December 2013


Is this a civilised society?

Kim Jong Un's Uncle Jang Song Thaek has been 'Executed By Machine Gun Fire' In North Korea apparently.

He is believed to have been accused of plotting against the regime, as well as partaking in gambling and womanising.

North Korea said in a statement via the state news agency on Thursday night that a military tribunal had ordered the execution of Jang Song Thaek, the first public killing of a senior official in many years.

In a message displayed on billboards and played in metro stations, Pyongyang declared the bespectacled man once considered the second most powerful official in North Korea "a traitor to the nation for all ages who perpetrated anti-party, counter-revolutionary factional acts in a bid to overthrow the leadership of our party and state and the socialist system."

South Korean President Park Geun-Hye said the South feared a wave of purges would follow, as 30-year-old Kim seeks to further cement his leadership.

"North Korea is now engaged in a reign of terror while carrying out a massive purge to consolidate the power of Kim Jong-Un," she told a cabinet meeting.

I am not surprised that she is worried...

Thursday, 12 December 2013

University gender segregation

There was a piece on the Today programme concerning this topic that I was not aware off.

Apparently universities have been advised by legal teams that they must enforce gender regulation when certain speakers are on campus. Whatever happened to human rights I hear you ask.

In a statement, UUK [Universities UK] said: "The guidance was approved by senior legal counsel as properly reflecting the law. It is not prescriptive. Universities are independent institutions and will make decisions on a case by case basis.”

Their new guidance to universities on external speakers states that the segregation of the sexes at universities is not discriminatory as long as both men and women are segregated side by side rather than women being made to sit in the back. Would racial apartheid have been non-discriminatory if white and black people had been segregated in the same manner? In fact that is the very argument the apartheid regime of South Africa used when faced with criticism: separate but equal.

This just smacks off taking the point too far and hopefully they will see the folly of their ways and retract this enforcement.

Wednesday, 11 December 2013


They are starting to build up on the Prime Minister of this coalition.

We all know that politicians can be pretty flexible but most of them maintain some sort of identifiable core. And of course it is not just possible but right for people to change their minds thanks to thought and experience. What does Mr Cameron believe?

One minute he wants to commit us to war in Syria, so grieved is he by the plight of its downtrodden people. The next, he is denouncing the alleged horrors of the Sri Lankan regime.

Then off he goes to China, the world’s largest police state, dotted with prison camps, which also happens  to be the world’s most aggressive colonial power, and his hectoring voice diminishes to a humble squeak.

He denounces ‘banging on’ about Europe, crime and immigration, then he bangs on about them.

He moves from condemning wind farms as ‘giant bird blenders’ to being a green zealot, then lets it be known that he is tired of ‘green c***’. He has been down a similar twisting lane on the subject of homosexuality.

Not much of this has any meaning. Pledges to curb immigration have turned  out to be as empty as when he first made them. He said he would bring down net migration. It increased, because we cannot stop EU citizens entering our territory. Did he not know that? Of course he did. I just don’t think he cares.

Is it safe to have somebody like this in charge of a government?

Tuesday, 10 December 2013

Opinion - silly season

Recently we have seen a theory that monetary injections are deflationary because you need lower inflation in order for people to be willing to hold larger cash balances. Little did we know that inflation would fall!

Then we have the chancellor informing us that a huge rise in the minimum wage, hard on the heels of a previous increase, will actually create new jobs. And yet I don’t see many liberal economists accusing him of “voodoo economics.” But that term’s passé, as even liberals now claim that deficits pay for themselves in terms of economic growth.

Apparently if the Portuguese do not do something quickly they might end up looking like Germany, a country with 5.2% unemployment where the top 10% earn a scandalous 31% of the income. I would guess the top 10% of my earning years while I was still working have produced about 31% of my lifetime income, which means that Germany is as unequal as a country containing 80 million people, all at different stages of their life. I guess liberals have finally realised that they have no answers to high unemployment, so they will focus instead on “inequality.”

And then there is the ECB, assuring folks not to worry, they have a 2% inflation target and intend to meet that target [despite the fact that they are falling ever further behind]. Please take your time before “reflecting” on solutions; there is no hurry.  It is not as though the Euro zone has been in recession for 6 years.

Monday, 9 December 2013

Shadow Chancellor

Last week the shadow chancellor replied to the autumn statement given by the chancellor and it was not much good. I am not a professional at giving public speeches but considering the opposite benches went hell for leather to put off Ed Balls and the speaker is about as effective as a chocolate tea pot, I would have done exactly opposite from what Ed Balls did and talk quietly, very quietly until the speaker had interrupted so many times every one else pissed off and I could give the speech properly. Not sure if that would work, but shouting louder and louder certainly does not!

It might be time for a change, so who is in the running?

Alistair Darling - The favourite. Labour needs someone who can give them at least semblance of economic credibility. Darling has the experience, all things considered is relatively liked, and his plan for the economy was arguably more austere than what we have ended up with from Osborne. [If Mrs Darling doesn’t mind…]

Yvette Cooper – Might make things at home a bit awkward. [The new Plan B is to get Cooper in as the next leader post-Miliband, so would she even take the job?]

Alan Johnson - Things could have been so different if it had not been for that unfortunate “personal reasons” business back in 2011. [Would be the ultimate revenge for the former Shadow Chancellor].

Chris Leslie - Balls’ deputy and Brown’s photocopy boy, Leslie has spent the last few months looking like a rabbit in the headlights in TV interviews that his boss wanted to dodge. [A brave bet on account of his general incompetence].

Rachel Reeves - In charge of the Shadow Chief Secretary to the Treasury brief until the reshuffle, perhaps boring, snoring Rachel could bore the Tories into submission in 2015. [Has friends with Ed’s ear].

Liam Byrne - Baldamort rises again? Ed could do worse than sending for the acceptable face of Thatcherism to sort out his party’s economic policy. [If only he were not too scared of the unions, and of course he would spend every penny he could get his hands on].

Chuka Umunna - Deeply unpopular within his own party, though his background at shadow BIS [Business, Innovation and Skills] puts Labour’s pretty boy in the frame. [Lord help us].

Stewart Wood - Would be nice for Miliband to have a friend as Shadow Chancellor. [A long shot given he is a Lord].

Hilary Benn - Has an economic background, and it would be fitting for a Bennite to take over the Labour Party. [At least Owen Jones would be happy].

Peter Mandelson - Would get rid of some of the wealth-creator bashing rhetoric, though is more interested in working for third world dictatorships these days. [They could not afford him anyway].

Gordon Brown - Things are not that bad. [Well, not quite].

Friday, 6 December 2013


Yesterdays autumn statement did show some confidence in the coalitions past three years of activity, but to me it sounded more like a party political broadcast than a financial statement.

The growth forecast for the next seven years by the OBR [Office for Budget Responsibility] did not have any correlation with what the chancellor had to say. He considers that the current 0.2% growth will turn into 2.7% by 2020, now that is optimistic.

Nice help for small businesses though in the form of business rates in England to be capped at 2% rather than linked to RPI inflation, with some retail premises in England to get a discount. Businesses moving into vacant high-street properties will have their rates cut by 50% and employer National Insurance contributions are to be scrapped on 1.5 million jobs for young people.

It does appear they are worrying about the 2015 election, because if the voters do not see an improvement in their personnel situation, then the grass will look greener on the other side.

Thursday, 5 December 2013

London Mayor

Boris shifts his message and admits "there is too much inequality".

After previously denouncing efforts to reduce inequality as "futile", the mayor concedes that the gap between the rich and the poor is too large.

As well as failing an IQ test and revealing that he doesn't know the price of a tube ticket, Boris Johnson's appearance on LBC this morning also saw him subtly shift his message on inequality. In his Margaret Thatcher lecture last week, the mayor presented inequality as both inevitable and desirable, denouncing efforts to reduce it as "futile". But yesterday he qualified this message by conceding that at the moment "there is too much inequality".

He said: "If you look at what’s happened in the last 20 to 30 years, there’s been a widening in income between rich and poor – there’s no question about that, and what hacks me off is that people with ability have been finding it very difficult to progress in the last 20 years and we’ve got to do something about that."

Boris's declaration that the gap between the rich and the poor is too large sets him apart from Tony Blair and other New Labour figures, who tended to respond to questions on the subject by quipping that they didn't go into politics to make David Beckham earn less money. He is also entirely right to recognise the link between social mobility and inequality.

But Boris's belated acknowledgment that inequality is too high only intensifies the question of why he is in favour of policies, such as a reduction in the top rate of tax [he has called for the government to consider a 30p top rate] and the return of grammar-style schools, that would make the gap even wider.

Wednesday, 4 December 2013

Green shoots!

Britain is having an unusually robust recovery this year.

That is not 100% clear, as the GDP numbers are good but not awesome. Even so, I do see there seems to be lots of high frequency data suggesting that more good GDP numbers are on the way.  So let us take it as a working assumption and try to identify the causes.

I always start from an AS/AD perspective, keeping in mind the two can and often are “entangled.” So we need to start with the inflation/RGDP splits. It looks to me like inflation has averaged 1.8% during the first three quarters and RGDP growth has averaged 2.5%, for a total of 4.3%. I see two ways to interpret these numbers from a supply-side perspective:

1.  The split is not all that impressive from a supply-side perspective, at least for a deeply depressed economy such as Britain.

2.  The split is much better than the abysmal splits seen in recent years, where inflation was often much higher than RGDP growth.

Put them together and it suggests not so much a very strong positive supply shock, but rather an ebbing away of previous negative supply shocks. Perhaps oil production is falling more slowly, or contracting finance is no longer a net drag, or VATs and other fees are no longer being raised. When you stop hitting yourself with a hammer, you feel better!

Also on the supply-side there is the “self-correcting mechanism,” but that begs the question of why so much more this year than past years.

And finally, the top income tax rate was cut from 50% to 45%, which is a modest plus for the supply-side. If rich Frenchmen are drawn to London, that boosts AS.

The 4.3% NGDP growth rate does seem to be faster than in previous years, so demand-side factors probably play a big role in the speed up in growth. But this area is even trickier than the supply-side.

Monday, 2 December 2013

The truth behind excess energy bills

A lot has been said recently that the green levies are crippling the energy companies, the truth is that profiteering by the energy cartels has been excessive and needs to be controlled.

The big six energy suppliers have been accused of "cold-blooded profiteering" after official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills. The industry regulator Ofgem, which produced the estimates, said profits per household would reach £100 over the next 12 months.

Other new figures obtained from British Gas, EDF and the four other suppliers showed their profit margin from power generation, a separate part of the business averaged more than 24% in 2011. They are believed to have risen since.

This cold-blooded profiteering has to stop, but piecemeal market reforms will not go far enough, especially given the threat of a dash for gas that will send bills through the roof. It is quite clear now that the Prime Minister David Cameron has realised that a problem exists as they have started a panic in the civil service to find an answer before the next election of May 2015.

Friday, 29 November 2013

Student loans

It now appears that £5 billion out of £22 billion government loans to students has become unaccountable. That is civil service speak for lost! What exactly do civil servants do all day?

There are 368,000 student borrowers for whom there is no current employment record, or other details on earnings, according to a study by spending watchdog the National Audit Office [NAO]. It means the Government does not have enough information to decide whether these students should be making repayments on their loans, and if so, how much.

More than a third [35%] of new loans taken out are not “expected” to be repaid, according to Government figures, and around half of students are not expected to repay their debt fully. It appears that civil servants spend their day working out the percentage of people who they are not monitoring correctly.

Last week we were told that the government has sold £890m of student loans to a debt management consortium for £160m. Another good deal?

This is a system that has failed young people at every level, and which is then clearly completely incompetent when it comes to recouping missing funds. Liam Byrne has it that so many loans are being written off that the new system is more expensive than the old one. People do not feel they owe the government anything, and it is made it far, far too easy for a generation of angry people to disappear.

Thursday, 28 November 2013


Big news at present, however, I have nothing against immigrants, I think it is all too much fuss. The more we stoke public anger and distrust on immigration, the more we threaten the stability of our political system in general.

Fifty years ago, two academics set out to study the 1964 general election. Aside from tracking the influence of the usual issues, David Butler and Anthony King pointed to the growing importance of a new issue in British politics: immigration. The picture they painted is eerily familiar: a heavy majority of voters believed there were too many immigrants; politicians were accused of joining in a conspiracy of silence on the issue; the then-Conservative leader, Sir Alec Douglas-Home, warned that a million Commonwealth migrants were waiting to descend on Britain.

Fast forward 50 years, and immigration looks set to dominate the next two big elections in British politics: the European elections in May 2014, and the general election in May 2015. And not a lot has changed since the 1960s. British voters remain strongly in favour of reducing immigration and hostile toward immigrants and are now more so than their European neighbours. Commentators attack political elites for not listening. And claims that a tsunami of new migrants from Bulgaria and Romania are about to arrive and detonate a crime wave are now entrenched in the public mindset.

Public disillusionment over immigration has peaked on two earlier occasions, in 2003 and 2006-07, amidst earlier debates over asylum and EU expansion. But since 2010, it has been consistently on the rise, and never before has this trend lasted for so long. This is especially worrying for Labour who have consistently trailed among this disenchanted lump of voters since 2000, reflecting how they have simply not connected in any meaningful sense on this issue. And the issue looks set to become only more important as concerns over the economy subside, which is one big reason why UKIP will finish strongly in May, including in Labour areas.

There will come a point, which perhaps we have already passed, where the damage that is being inflicted on our politics becomes irreversible. Rather than cling to the conventional wisdom that disenchanted and perhaps would-be UKIP voters will respond rationally to a change of policy or tougher rhetoric, we should accept the reality that irrespective of what is offered, more and more voters are moving from the mainstream to the margins, guided by a toxic and - to be frank - nasty group of opinion-makers in our society who appear to relish sowing the seeds of xenophobia, protest and division. Make no mistake: unless we chart another course this 'debate' will have serious and long-term effects on our politics, and the already fragile link that binds our citizens to the democratic arena.

Wednesday, 27 November 2013

What is zero bound?

If it were possible for central banks to cut rates below 0%, would we still have experienced the Great Recession of today?

No, we would not have experienced the Great Recession. [except I cannot say that as I do not know]

However, there are lots of evidence pointing to the zero bound not being the real problem.

Other countries such as the eurozone and Sweden have experienced similar recessions, or worse, despite being above the zero bound for the vast majority of the past 5 years. You can write off the eurozone because of the cluelessness of the institution under Trichet, but Sweden is not so easy to write off. They did some very sound monetary policy in the first couple years of the recession, and then mysteriously gave up. And Sweden has a long tradition of great expertise in monetary policy and progressive policymaking.

The discussion in the US has not been what you would expect if economists actually thought the zero bound had caused the Great Recession. To begin with, the only reason the Federal Reserve has not cut IOR [Institute of Recruiters] further is that they are worried about the “break the buck” problem in the MMMF [Man-Made Mineral Fibres] industry. But if that trivial institutional quirk were widely seen as preventing the sort of faster GDP [Gross Domestic Product] growth required to avoid a Great Recession, there would have been massive demand for reform of the system.

Recall that the Fed got Congress to immediately give them authority for IOR in 2008 when they told Congress they needed it. As far as I know reform of the MMMFs was not even a part of Dodd-Frank. There is no evidence that mainstream economists, pundits, bloggers, etc, lose sleep over the break-the-buck problem, which prevents negative IOR.

So what is really going on here?

Lots of economists have not really thought through what they believe. At a certain level they believe the zero bound is the problem, but if pushed with solutions they fall back on other arguments. Those on the right would talk about “structural problems.” Those on the left would argue that highly negative rates would just blow up asset bubbles and lead to more income inequality. Very few economists actually believe the zero bound is the cause of the Great Recession, because very few believe that excessively tight money is the cause of the Great Recession.

Tuesday, 26 November 2013


The great student loan sell-off has begun.

After announcing its intention to privatise the £40bn loan book earlier this year, the government has sold a £890m tranche to a private debt collection agency [Erudio Student Loans] for £160m.

The coalition has presented the move as a pragmatic step that will, in the words of Universities minister David Willetts, "allow us to reduce public debt and maximise the value of one of the government’s assets." But in reality, the reverse is the case. In order to attract a private buyer, ministers have sold the loans at a discount of £730m. While analysts will debate the precise price, it would have been impossible for the government to sell them at a profit.

As Martin Wolf explained earlier this year, "no private party has a lower borrowing cost than the government, since the government is the most creditworthy entity in the country. So the value of the student loan book to the government, given its low discount rate, is higher than to any potential private buyer."

Why then, has the government opted for privatisation? Were the UK, like Greece, compelled to sell its assets to stave off bankruptcy, the move would make sense. But with its independent monetary policy [allowing the Bank of England to create new money], its above-average debt maturity and its growing economy, Britain is in no danger of insolvency.

The decision, like so much coalition policy, reflects the Conservatives' determination to prioritise short-term deficit reduction over long-term investment [which is what student loans are]. While the sale will save the government money today [allowing it to cut debt or taxes], it will cost its successors money tomorrow. But never mind the long-term economic interests of the country, George Osborne and David Cameron have got an election to win.

Friday, 22 November 2013

The Co-op Bank scandal

The debacle at Co-op Group and Co-op Bank highlights a fundamental problem for all mutuals or organisations owned and managed on co-operative lines by members. Which is that in order to thrive, they don't just have to be as efficient and successful as conventional companies that have outside shareholders, they have to be, in a broad sense, better than the mainstream [I will come back to what I mean by that]. The structural weakness of mutuals is that they typically don't have access to outside equity capital.

In the case of Co-op Bank, there was and is Co-op Group as the sole owner. But it did not have the resources to supply the £1.5bn of capital needed by Co-op Bank to continue trading. So the rescue of Co-op Bank has been complicated and tortuous - and involves its creditors converting £1.3bn of bonds and preference shares into equity capital and providing a bit more investment on top of that.

The Bank of England remains on high alert, just in case it all falls apart, and it would have to step in with an imposed rescue plan or "resolution" scheme that would protect depositors and the bank's important functions.

It will not have escaped your notice that the appointment as Co-op Bank's chairman of a former local councillor with an apparent taste for hard drugs, a history of downloading porn on to a municipally owned computer and [by his own admission] limited knowledge of modern banking, somewhat undermines Co-op's claims to be better than the rest in both those important senses.

How did he get the job?

Thursday, 21 November 2013

Oh Dear!

China has announced that it is abolishing the one child rule.

On the surface, this 'loosening' of the one-child policy appears to be a significant move, but it is still a long way from complete abolition. Although the policy’s eventual disappearance is inevitable under the pressure of an ageing population, family-planning officials who now have fewer policy violations from which to profit may even be motivated to enforce the remaining rules more harshly in the short term, while many of the intended beneficiaries of this reform were not the ones pressing for permission to have a larger family in the first place.

One of the results from China's 30 year policy of only one child families is, there are apparently 30 million single men in the country that have no prospect of a wife, mainly due to everyone having boys as their child.

This can only end in tears.

Wednesday, 20 November 2013

Tweet off!

Emma Way now saddened by her tweet "Definitely knocked a cyclist off his bike earlier. I have right of way - he doesn't even pay road tax! #Bloodycyclists" because a court has ordered her to pay a £337 fine, £300 in costs and was given seven points on her licence. She has been convicted her of failing to stop after an accident and failing to report it.

The firm where she works have suspended her and she is getting trolled on the net, trollolol...

Tuesday, 19 November 2013

IDS fibbing again?

The Work and Pensions Secretary claimed that "child poverty rose" under Labour; it fell by 800,000.

Iain Duncan Smith has acquired a reputation for playing fast and loose with the facts and he was up to his tricks again at Work and Pensions Questions in the Commons. Towards the end of the session, he declared that "child poverty rose" under the last government. But as so often, the data tells a different story. Under Labour, child poverty fell from 3.4m in 1997 to 2.6m in 2010, a net reduction of 800,000 and the lowest figure since the mid-1980s.

While child poverty has fallen under the coalition to 2.3m [largely due to the overall drop in average household incomes, which resulted in a relatively higher poverty threshold], it is projected to rise by 600,000 by 2015-16 as the government's welfare cuts take full effect. As the IFS [Institute For Fiscal Studies] has noted, "Despite the impact of universal credit, the overall impact of reforms introduced since April 2010 is to increase the level of income poverty in each and every year from 2010 to 2020." The forecast rise will reverse all of the reductions that took place under Labour between 2000-01 and 2010-11.

Rather than slandering the last government, Ian Duncan Smith would do well to turn his attention to that.

Monday, 18 November 2013

Green shoots!

Europe is at this point doing worse, at least as measured by industrial production, and probably in terms of overall output than it did in the Great Depression.

The usual response is that things were different then, because Europe was rearming. Is this trying the lack of manufacturing debate, even though we are shutting down a major shipyard in Portsmouth.

There is nothing special that makes military spending a better stimulus than other kinds of spending actually the reverse, because spending on useful stuff can enhance the economy’s long-run potential as well as giving it a short-term boost. So when you attribute European recovery in the 30s to military spending, you’re saying that what the economy needed back then was expansionary fiscal policy and it needed it so badly that even destructive spending had a positive effect.

This time around, the good news is that we have peace. The bad news is that Europe’s leaders, lacking the incentive to build up their armies, have listened to prophets of austerity, and cut spending when it should have been going up. And the result is a depression that is well on track to be worse than the 1930s.

Friday, 15 November 2013

Energy companies - ./spit

The energy companies cannot avoid the blame for rising prices.

While shifting the debate towards green levies, the Big Six have remained much quieter about their healthy profits.

They may be public enemy number one but you cannot accuse the energy companies of being inept at public relations. Since their appearance in front of the energy select committee two weeks ago, the Big Six have successfully moved the conversation about energy bills away from their own profits and practices and on to so-called green levies. But by promising to "roll back" these charges, the Prime Minister is marching to their tune and failing to get the best deal for consumers.

Energy companies like to blame anyone but themselves for rising energy prices. In announcing their inflation-busting price rises, energy companies were quick to focus on wholesale gas prices and the levies on bills for low carbon energy and fuel poverty reduction.

They were much quieter about their own rising profits and operating costs. Energy firms make a healthy 5 or 6 per cent from their supply arms. They claim this is needed to make necessary investments but their own generation businesses report profits as high as 20 per cent.

Instead of scrutinising the acceptability of this level of profits in the energy supply industry, or questioning why operating costs appear to be spiralling upwards, the media have lapped up energy bosses describing green levies as a "stealth poll tax".

The only obfuscation, however, is by the energy companies themselves. New figures from Ofgem, released following a freedom of information request by IPPR, show that the two companies performing least well are those that have jacked up their energy prices the most. British Gas added £50 to consumers' bills for these charges but has delivered just 4, 6 and 9 per cent of its obligations. Scottish Power, by contrast, have delivered 24, 48 and 31 per cent and only raised green charges by £20.

Instead, we need a much more targeted approach to fuel poverty. The best approach is for local organisations to give out free assessments to work out who is fuel poor so that support reaches those who really need it. And to help everyone who is struggling with high energy bills, low interest loans for making energy efficiency improvements should be made widely available.

Of course, we could all stop paying our energy bills, that would screw them…

Thursday, 14 November 2013

Banks, Energy companies, Estate Agents whose next?

There is an old saying that if you kill one man they put you in prison, if you kill 100,000 men they build a statue in your honour. It could be re-written today as, if an individual extorts money he is put into prison, if a government extorts money it is praised for getting tough on banks.

To a public angry at banks for their role in the financial crisis, this may all seem like reasonable retribution. Yet in many cases the rush to punish is overturning basic principles of justice. Take the settlement agreed to by JPMorgan. The accompanying statements from both the bank and the regulator involved, the Federal Housing Finance Agency, provided no indication of what the firm did wrong and no admission of guilt. JPMorgan is the fourth institution to settle over its dealings with Fannie and Freddie without going to trial, following settlements by General Electric, Citigroup and UBS.

Bank executives contend that they have little choice but to accept punitive settlements because the alternative, facing a criminal indictment and going to court, could destroy their businesses, even if they are subsequently found not guilty. This is because they risk losing their banking licences or being shunned by clients while charges are pending. In some cases regulators make these threats explicitly. Last year New York’s financial regulator threatened to revoke the state banking licence of Standard Chartered, which would in effect have excluded the British bank from America.

Most people react to this type of story that an emotional level; either the banks deserve what they’re getting [liberals] or they’re being treated unfairly [conservatives].

Wednesday, 13 November 2013

Old Bailey high-lights

::[disclaimer: bad language ahead...]

Rebekah Brooks, her husband Charlie and News International’s head of security conspired to conceal material from the police including hiding a laptop behind rubbish bins in an underground car park after a drop-off disguised as a pizza delivery, the Old Bailey heard earlier this week.

The prosecution detailed an elaborate plan in which Mr Hanna and a colleague retrieved a laptop and a jiffy bag that had allegedly been hidden by Mr Brooks behind a bin in the car park of his Chelsea Harbour flat. The material was allegedly then driven to News International’s Wapping offices while police raided the home.

“The coast was clear after that,” said Mr Edis.

Mr Hanna then hatched a plan to return the material to the car park in the guise of a pizza delivery to Mr Brooks, the court heard.

The associate of Mr Hanna who delivered the material to a hiding place behind bins, sent a text message to his controller that referenced a line from the film Where Eagles Dare: “Broadsword calling Danny Boy. Pizza delivered and the chicken is in the pot.”

In reply, the controller wrote: “Ha! Fuckin amateurs! We should have done a DLB [dead letter box] or brush contact on the riverside! Cheers mate, log in the hours as ‘pizza delivery’.”

However, the plot went wrong when a cleaner found the hidden material and gave it to his manager, who called the police.

Monday, 11 November 2013


John Major is having a pop at the elite, allegedly!

In September, the New Statesman and the Intergenerational Foundation teamed up to run an essay competition for A level students. The topic was "has Britian robbed its children?" and the winning entry was by Conor Hamilton.

The message is clear: young people are lazily relying on the old. One reason this narrative is so effective is that there is a widespread anxiety today’s children will not value and uphold the efforts of the generations that came before them. It plays on a fear that young people are not fulfilling their part of an intergenerational contract, preferring to live their lives selfishly. However, what if the breach of contract is the other way around? What if older generations have been living an unsustainably extravagant lifestyle, leaving little for those that will come after them?

The immediate evidence for this would be the UK’s national debt, which has increased from 34 per cent of GDP in 1991 to 90 per cent. This debt is so large that the interest we pay on it is roughly the same size as our defence budget. Unfortunately, the interest will only increase as our debt shifts to just short of 100 per cent of GDP, as it is predicted to have done by 2015. It seems the taxpayers of tomorrow will be struggling with the debts of yesterday for a long time to come.

However, it is not only the profligacy of the last generation, commonly deemed synonymous with the previous Labour government, that will harm the young. The austerity measures pursued by today’s coalition are also unfairly weighted against young people. University funding and housing benefits for the young have been slashed, employment schemes have been abandoned and the Education Maintenance Allowance (EMA) has been scrapped in England.

Meanwhile, pensioners are exempted from caps on housing benefit, pensions remain triple-locked and universal benefits such as winter fuel payments, free TV licenses and free bus passes, all remain untouched. None of those benefits existed 16 years ago. Strangely, the current deficit reduction plan shows little concern for those who will have to pay the money back.

As a result, Britain’s homeowners have stopped investing in useful things like businesses, and have instead starting using their homes as an easy source of cash. Every time someone takes out a second mortgage or downsizes to make the most of their house’s increased value, they bring that over-inflated profit along, even though they have done relatively little to earn it. This cost is then paid by the people entering the market for the first time or looking to upscale. Yet again it is the younger generations that must over-pay because of the actions of the old - a cost which has been estimated at £1.3trn pounds in total.

This has dire consequences for the distribution of wealth, which has been shifting in favour of elderly in recent years. A Bank of England study found that in 2005, the average wealth of people aged between 25 and 34 had fallen to a third of its 1995 value, whereas the wealth of those aged 55-64 had tripled.

A lack of affordable housing and heaps of private and public debt won’t just deprive the young people of the chance to accrue material wealth, it will also delay their chances of becoming adults. This latest housing scheme does not address the real issue that WE ARE NOT BUILDING ENOUGH HOUSES!

Friday, 8 November 2013

Interest rates

Yesterday, in a shock move, the ECB [European Central Bank] has reduced the benchmark interest rate by a quarter to 0.25%. This was previously unchanged for the last twelve months. Reason unknown!

The official statement from the (ECB) says that it has cut the core interest rate in a bid to boost flagging economic recovery in the Euro area. However, there have not been many reports recently flagging any momentum that would require a change. The moved startled many investors while most economists thought the bank would wait to offer more economic stimulus at least until December.

The Bank of England yesterday kept its rates at 0.5% which have been stable for over four years now.

In addition to the ECB cutting its main refinancing rate to 0.25%, it held the deposit rate it pays on bank deposits at 0% and cut its marginal lending facility, or emergency borrowing rate to 0.75% from 1%. A lower refinancing rate makes it cheaper for banks to borrow from the ECB, in hopes that that lower rate will be reflected in what companies pay for credit.

The real question is this a reaction to the figures produced recently showing we are currently moving through a deflationary period.

Thursday, 7 November 2013

DWP and computers

It’s going to be another uncomfortable day for Iain Duncan Smith. Today’s Public Accounts Committee report on Universal Credit is one of the most excoriating anyone can remember. Margaret Hodge and her colleagues warn that most of the £425m of public money so far spent on the programme is likely to be written off, that management of the project has been “alarmingly weak” and that the DWP has consistently failed to “grasp the nature and enormity of the task”, missing early “warning signs” and refusing to “intervene promptly”. He should have hired us and now he would have a working system :)

Labour, meanwhile, has focused its criticism on Cameron, not IDS. In her response to today's report, Rachel Reeves said: "Today’s report from the Public Accounts Committee is a shocking confirmation of David Cameron’s failure and another nail in the coffin of his Government’s promise to deliver Universal Credit on time and on budget. Families facing a cost of living crisis need welfare reform they can trust. Instead they’ve got an out of touch Prime Minister who has presided over chaos and waste."

It now turns out that behind the scenes IDS has been rallying support to blame the civil service on this latest fiasco. The work and pensions secretary took the rare step for a cabinet minister of publicly blaming civil servants after the release of a scathing report by the National Audit Office (NAO) on the introduction of universal credit. The report said the welfare changes had been poorly managed and were riddled with major IT problems, threatening to increase costs by hundreds of millions of pounds. How far does this have to go before it is stopped?

Wednesday, 6 November 2013


I'm currently following Rebekah Brooks and Andy Coulson at the Old Bailey, fascinating, there is soooo much to come out!

However, it was Guy Fawkes' Night last night, a traditional night of celebration when we let off fireworks and light bonfires. It commemorates an attempt in 1605 to blow up our houses of parliament when our King was addressing it.

It is a somewhat ambiguous celebration. Originally the celebration was ordered to celebrate the escape of the King from assassination but over time Guy has attracted more and more sympathy and many modern English people see the festivities as an anarchist celebration that someone had the balls to have a go at our rulers.

Of course, if we were to try this today we would naturally get into trouble, but sometimes it is worth considering tweaking the political nose a bit!

Monday, 4 November 2013

More reasons to ignore inflation

I have argued that inflation is a highly misleading variable, and should be dropped from macroeconomic analysis. To replace it, we would be better off looking at variables such as NGDP growth and nominal hourly wage rates. A paper by Coibion and Gorodnichenko illustrates the problems with using inflation (although they reach very different conclusions.)  The paper starts off with a quote from Bob Hall:

“Prior to the recent deep worldwide recession, macroeconomists of all schools took a negative relation between slack and declining inflation as an axiom. Few seem to have awakened to the recent experience as a contradiction to the axiom.” Bob Hall [2013]

Not my school!! In my book on the Great Depression [which my publisher seems determined shall never see the light of day] I argue that the standard model is wrong, slack does not cause disinflation.  For instance, prices rose sharply after March 1933, despite the greatest level of slack in US history.  Rather falling NGDP causes slack, and is often associated with falling inflation.

Here is what they discovered about inflation expectations:

Specifically, we show that an expectations-augmented Phillips curve, using household inflation expectations as measured by the Michigan Survey of Consumers, can account for the absence of strong disinflationary pressures since 2009. The primary reason for the success of a household inflation expectation-augmented Phillips curve is that household inflation expectations experienced a sharp rise starting in 2009, going from a low of 2.5% to around 4% in 2013, whereas other measures of inflation expectations such as those from financial markets or professional forecasters have hovered in the close neighbourhood of 2% over the same period.

The public’s confusion was due to the fact that they focused on price increases from the supply-side, i.e. those that reduce living standards, not the demand-side:

Friday, 1 November 2013

The NHS just don't get it

Details have now been released that managers have been made redundant, given huge payments [millions of pounds] and then rehired at a later stage.

The people reporting this are saying that nothing illegal has taken place, how is that right?

In one instance it was a husband & wife team that were both laid off & paid off and then rehired. This is a joke!

Nothing will get done, it will just be swept under the carpet again, I would love to be sacked, given a huge cash amount and then rehired...

Why don't more people complain?

Thursday, 31 October 2013

Green taxes

That is a bit of an oxymoron, except where energy is concerned.

The two sides of Britain’s coalition government are lining up for a prolonged argument about how and whether the UK should remain committed to reducing the country’s reliance on sources of energy that produce greenhouse gases.

When they took power, David Cameron and Nick Clegg promised to lead ‘the greenest government ever’. But three years later, their environmental strategy has been blown off course. Why? Because an eye-catching proposal by the opposition Labour leader to freeze household energy bills if elected has focused public attention on what is being called ‘the cost of living crisis’.

The government rejects the energy price freeze idea. But the policy is popular, with more voters naming high energy prices as a threat to the economic recovery than any other potential danger. Over 80% of people also believe the energy companies exploit their customers.

As a result, the prime minister is under pressure from MPs in his own party to cancel the subsidies for investment in renewable energy, some of which push up the cost of ordinary household bills.

Is it disappointing that politicians abandon the high-minded aspiration to make the UK a more environmentally responsible economy when hardship strikes ordinary voters? Or is this a welcome dose of reality: the recognition that ordinary consumers cannot be expected to enjoy – or indeed vote for – policies that push up the cost of living, even if the goal is saving the planet?

Monday, 28 October 2013

Energy crisis

The latest guidance from the government is to only heat one room in your home.

Are they mad?

There is an election in 18 months and they come out with crap like this, the public are not going to forget. This winter is reportedly going to be one of the worst & most expensive on record. This is nearly as good as when the government recommended we should store petrol in cans at home and a woman burned to death in her kitchen.

I do not think we need any more details to show that the government are aliens...

Thursday, 24 October 2013


The home affairs committee has seen several people today from the police and connected services in connection with the incident surrounding Andrew Mitchell.

The good news is that the senior investigating officer [Chief Inspector Jerry Reakes-Williams] has made clear [and been allowed to make clear] the circumstances around the final report after the investigation and how the conclusions were changed. The Chief Inspector followed the mandate laid down by the IPCC and produced a report accordingly, however, his conclusions were over ruled by the three Chief Constables and so the rift began.

The bad news is that the three federation representatives followed and stuck to their story that they didn't believe that Andre Mitchell had told the truth and so made the media announcement at that time. To give Keith Vaz MP and his team credit, they were not so wishy-washy as select committees usually are and were quite firm in their questioning, however, they did not break down the barriers between the politicians and the federation.

The three Chief Constables turned up at different times, which was not explained by the chair.

Chief Constable David Shaw, West Mercia Police announced that he had sent a message to Andrew Mitchell with an apology for what has happened, however, he did not think there should be any more investigations into the matter of how Andrew Mitchell had been handled. He used wording during his answers which appeared to throw doubt on what Chief Inspector Jerry Reakes-Williams has said earlier, specifically that he had followed orders from the IPCC in respect of how the report should be handled although they have now been found to be unlawful. This is bizarre. He also appeared to have an agenda that was not going to be shifted by the committee.

When the three Chiefs eventually got together, rather than showing a consolidated front going forward, they all had different positions to make and it became surreal listening to them explain why they would or would not be taking actions in the future. If they think a simple apology to Andrew Mitchell will allow the public to move on and respect the police again, then they are mistaken.

Wednesday, 23 October 2013

Hackers get a review

Hackers with a criminal past could be recruited to serve in the new military cyber force, the Defence Secretary Philip Hammond indicated. He said the conviction and sentence would be examined but if the candidate got past the vetting process., there would be a place for them in the team

As well as protecting against online attack, the Joint Cyber Reserve Unit will have an offensive capability able to strike at enemies, which is where hackers could come into their own as military assets. There are many professional people out there who will have the skills that you might traditionally associate with the hackers' skill set who have never done anything illegal and who scrupulously maintain their activities on the right side of the law.

The new unit will have “considerable flexibility" in recruiting criteria, without the same standards of fitness required for infantry reservists.

Philip Hammond said: "What we are trying to do is recruit the very brightest and the best from across the IT industry and use the skill sets they have got in the national interest to enhance our cyber defences and to help us build an offensive cyber capability."

It now appears that they are taking this seriously.

Tuesday, 22 October 2013

Tesco give-away

Tesco have admitted they have thrown away 30,000 tons of food in the first six months of the year. Why would they do this?

No, not why do they throw food away, every supermarket does, the accountants hate it as it affects the bottom line, but why have they admitted it?

The company said it would be dropping some food promotions, such as some 'buy one get one free' offers, after it was shown two-thirds of produce grown for bagged salad is thrown out. As a result of the findings, it is to end multi-buys on large bags of salad and is developing mix-and-match promotions for smaller bags in a bid to help customers reduce the amount they are wasting.

Could it be that some bright spark has let on that today’s promotions are too old hat and they need a new format?

Monday, 21 October 2013

Even the church gets involved

The Archbishop of Canterbury has waded into the row over energy prices, warning that the latest wave of hikes looks "inexplicable". Justin Welby insisted the Big Six companies had an obligation to behave morally rather than just maximising profit.

The intervention, came after British Gas followed in the footsteps of SSE by announcing a 9.2% increase in prices. The head of the Church of England, himself a former oil executive, said he understood the anger the rises were generating.

"The impact on people, particularly on low incomes, is going to be really severe in this, and the companies have to justify fully what they are doing. I do understand when people feel that this is inexplicable, and I can understand people being angry about it, because having spent years on a low income as a clergyman I know what it is like when your household budget is blown apart by a significant extra fuel bill and your anxiety levels become very high. That is the reality of it."

The Archbishop urged firms to be "conscious of their social obligations", saying they had to "behave with generosity and not merely to maximise opportunity. They have control because they sell something everyone has to buy. We have no choice about buying it, with that amount of power comes huge responsibility to serve society.”

Friday, 18 October 2013

National Crime Agency

The UK’s biggest and most violent organised crime syndicate, the Provisional IRA, now sits in government and receives taxpayer subsidies through its political front organisation.

Through informally legalised drugs and all the issues they bring in their train, and the state-sponsored surrender to drunkenness begun under Margaret Thatcher and completed under Tony Blair, nothing happens to those who behave badly. There is no redress for their victims, besieged in their homes or fearful on the street, who have learned not to bother to seek help from the law.

The answer to this is not another bunch of poseurs in baseball caps, running around with guns and shouting. It is the firm enforcement of existing laws at street level by unarmed, foot-patrolling constables. But you will never see them again. Instead, the Government is spending almost half a billion pounds on the National Crime Agency, a rather sinister body whose very existence defies our national traditions.

It has been created without any fuss or major opposition. And one day, in the hands of a future government, it could be a real menace.

Thursday, 17 October 2013

Malala Yousafzai

What an amazing teenager.

I do not think there is enough written about the Taliban and what they have done in the past and should be shown to the world not as some body that is old fashioned and out of date but quite simply a criminal organisation that has been allowed to run riot for far too long.

The Taliban blew up 100 schools. Malala's was shut down, and she wrote how she was still studying for her exams in secret. This has come out because of what she has been saying recently but was not reported beforehand and if it has been reported then I missed it and am guilty as the next of ignoring what is happening on the other side of the world.

Which political party would consider blowing up schools the right approach to advancement?

Wednesday, 16 October 2013

Under reporting

There are so many things not reported by the western media, sometimes it is difficult to know where to start.

One thing that seems to have slipped the net is that China has the largest copper mine [outside Africa] in Afghanistan and they have wiped out a 7th century monastery in the process of digging.

Where are the liberals now?

Tuesday, 15 October 2013

Whatever happened to Leveson?

Listening to today's debate, it might as well never happened.

Lord Justice Leveson's report has been published and can be read by anyone, yet both sides [the politicians & the press] both have their interpretation which does not match.

He said quite clearly "An effective regulatory system must be adequately financed and have sufficient independence from its funding body to operate independently." whereas the politicians want a judicial body to oversee whatever replaces the PCC and the press are reeling against both ideas.

So no clarity today!

Monday, 14 October 2013

US shutdown

This is the week that America can go bankrupt, what will be the repercussions around the world?

One often hears that the US shutdown is the result of partisan bickering, that politicians should learn to rise above it and find bipartisan solutions for the good of the nation. Not only the Tea Party, but also Barack Obama is accused of dividing the American people instead of bringing them together. But what if this, precisely, is what is good about Obama? In situations of deep crisis, an authentic division is urgently needed: a division between those who want to drag on within the old parameters and those who are aware of the need for radical change. This, not opportunistic compromise, is the only path to true unity.

Freedom of choice is something that only functions if a complex network of legal, educational, ethical, economic and other conditions exists, the constraints that form the invisible underpinning to the exercise of our freedom. This is why, as an antidote to the populist right wing ideology of choice, countries such as Norway should be held up as a model: although all main agents respect a basic social agreement and large social projects are enacted in solidarity, the economy is thriving, flatly contradicting the common wisdom that such a society should be stagnating.

Back to the question, the world bank has made it clear that there will only be bad news.

Friday, 11 October 2013

America's finance

As the U.S. shutdown continues, what exactly can happen?

On October 17, when the government is projected to reach its debt ceiling, $85 billion of Treasury bills will mature. The interest rate on that T-bill issue last traded at 0.12 percent, up 1 basis point from late on Thursday and up 8 basis points on the week. The benchmark 10-year U.S. Treasury note was down 10/32, its yield at 2.651 percent.

The U.S. shutdown delayed the government's release of non-farm payrolls data for September, which had been scheduled for Friday. The Labour Department's monthly jobs report has been playing a key role in the Federal Reserve's assessment of the economy in its deliberations on when to scale back stimulus.

The problem is paying the bills when the balance sheet says there is no money, I wonder if they have taken advice from Laim Byrne?

Thursday, 10 October 2013


The government has had a reshuffle, nothing to see here except the appointment of Norman Baker to the Home office where I suspect that the first file he is going to ask for is connected with Dr David Kelly. Norman Baker has written a book where he practically accuses the government of the day of assassinating Dr David Kelly.

Norman Baker has said in the past that his computer hard drives were wiped remotely while he was sleuthing around the Kelly story and that Robin Cook’s death was suspicious as it was on MoD land!


Wednesday, 9 October 2013

FT stumped!

The FT has been looking over some recent remarks of the IMF president Christine Lagarde and is baffled.

Christine Lagarde’s remarks show the damage done to emerging markets by a recent round of “taper talk”, over the possibility of the US Federal Reserve slowing the pace of its asset purchases and their vulnerability to future changes in the pattern of global capital flows.

“The immediate priority is to ride out the turbulence as smoothly as possible,” said Ms Lagarde. “Currencies should be allowed to depreciate. Liquidity provision can help deal with dysfunctional market behaviour. Looser monetary policy can also help.”

But she warned that countries with inflationary pressures – such as Brazil, India, Indonesia and Russia – have less scope to use monetary policy and that high debt and deficits mean many developing countries have little space for fiscal stimulus either.

The FT say they have no idea what she is talking about.  Or more precisely, certain paragraphs seem to have one implication [not enough AD in the developing world] and other paragraphs seem to flatly contradict that interpretation [too much inflation.]  Taken literally, she seems to imply that places like Brazil, India, Indonesia and Russia are in better shape than most, but the clear implication of the remarks is exactly the opposite.

Even if you prefer to talk about other topics, say capital flows, how do they impact RGDP/NGDP or AS/AD.

AD = aggregate demand
AS = aggregate supply
GDP = gross domestic product
NGDP = nominal GDP
RGDP = real GDP

Tuesday, 8 October 2013


The next election might be better than we expect.

As the conference season winds down it has become clear that Labour has moved to the left and the conservatives have moved to the right, both leaving the magical centre ground which of course does not actually exist.

As a result of this the next election is shaping up to be a vicious one at which each of the parties will accuse the other of living in the past. Labour will shout: "Same old nasty Tories [and their newspapers]. " Tories will snarl: "Same old dangerous Labour." On current form, it is the Conservatives, answering tomorrow's challenges by dusting off dated narratives, rusty tactics and stale slurs from 20 years ago, who are looking the most retro.

Monday, 7 October 2013

Right to buy

I have mentioned this before

but the government is still going ahead with it, not only that but David Cameron has brought the scheme forward by three months and the banks are not ready apparently.

What I did not mention last time which is the message I am trying to get across is, going back to the bad old days of 2008 and the economic crisis, Basel III has put pressures on banks to keep "more" capital on the balance sheet, hence business moaning about not getting at funding which they need.

Now the government has realised that ‘would be’ home owners are snookered by this action too and so have retracted on the ‘out of fashion’ 90% mortgages and is in fact recommending them. This is quite simply a cynical ploy to get votes for 2015 and cannot possibly help the economy in either the short term or the long term.

Friday, 4 October 2013

Has the world order changed?

Have the events of September 2013 changed the way the world is run?

At the start of the month it seemed pretty certain that America would bomb the Assad regime in Syria as a punishment for using chemical weapons.

Then a number of wholly unexpected things happened. Britain's parliament voted not to join in a bombing campaign; President Obama decided he would have to put the issue to Congress before going ahead; and some clever diplomatic footwork by Russia resulted in an offer by Syria to destroy its chemical warfare arsenal.

The world looked like a distinctly different place by the end of the month. It was not simply that war had been averted, the United States seemed diminished, and its previously reliable ally, Britain, was shown to be irrelevant in an area of the world which it once dominated.

Now America is heading for bankruptcy!

So who is next?

Russia, I think not, their little spat is merely political malarkey.

China, well frankly China seem to be a little quiet as the new regime is trying to woo the west, not ruffle it's feathers.

Brazil, once the talk of the world as the new black but south America has dwindled, so who will be next?

Thursday, 3 October 2013

The depressed economy is all about austerity

Right now the official unemployment rate is over 7 percent. That’s bad, and many people think it understates the true badness of the situation. On the other hand, there are some people arguing that at this point, possibly thanks to long-run damage from the Great Recession, “full employment” is now a number north of 6 percent. So there is considerable uncertainty about just how depressed we are relative to potential.

But we are clearly still well below potential. And we have also had exactly the wrong fiscal policy given that reality plus the zero lower bound on interest rates, with unprecedented austerity. So, how much of our depressed economy can be explained by the bad fiscal policy?

To have something that would arguably look like full employment, at this point we would not need a continuation of actual stimulus, all we would need is for government spending to have grown normally, instead of shrinking.

Let us compare actual government purchases of goods and services since the Great Recession with what would have happened if those purchases had grown as fast as they did starting in the first quarter of 2001.

The gap is large and has been growing rapidly, it is currently more than 2 1/2 percent of GDP. Given reasonable multipliers, this suggests that real GDP is somewhere between 3 and 3.75 percent lower than it would have been without the austerity. And given the usual Okun’s Law rule of half a point of unemployment per point of GDP, this in turn says that without the austerity we would have an unemployment rate well under 6 percent.

I want to make the point that given what we know and have learned about macro these past five years, and given the modest recovery that has taken place, we are now at a point where, to repeat, to a first approximation the depressed state of the economy is entirely due to destructive fiscal policy.

The austerians have a lot to answer for.

Wednesday, 2 October 2013

America bankrupt

The US government does not have money to spend. In fact, if America does not increase its spending limit, all the programmes functioning under the government would have to be closed down. But this has happened before because America has faced a tough situation 17 years ago. Bear in mind that The U.S. has not had a trade surplus in 37 years.

The problem is the government requires a budget to pay for services and that has to be agreed by the senate [parliament].

It is one of those numbers that is so unbelievable you have to actually think about it for a while... Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?

But it is not about numbers, it is about a group of republicans who are miffed at losing a vote earlier on America's health bill and they are having a tantrum, surely the American people can see their politicians for what they are and will respond accordingly at the next election.

Tuesday, 1 October 2013

Chancellor of the exchequer

First he starts on the current situation and why we are here, then he mentions the other party conferences with the usual splash of humour at the Lib Dems & Labour expense. His main aim is to show that "our" priority is the economy so there must be a credible plan and whereas the other two do not have one, the conservatives do.

He then goes on to flesh out the details, frankly I am impressed, but will they pull it off?

Monday, 30 September 2013

Market bubble?

Home prices have been rising rapidly, so much so that there is talk that we are entering another national bubble. Is it possible that we are lapsing into a bubble mentality, a self-reinforcing cycle of popular belief that prices can only go higher?

People who are now inclined to buy a home are most often just thinking that we are gradually recovering from a recession and that this is a good time to buy. The mental framing still seems to be about economic recovery and the likelihood that interest rates will rise. People mostly don’t seem to be prompted by the anticipation of another housing boom.

That is the thinking at the moment. But whether these attitudes mutate into a national epidemic of bubble thinking, one big enough to outweigh higher mortgage rates, fiscal austerity and other factors remains to be seen.

Friday, 20 September 2013

Currency depreciation

The liquidity trap hypothesis implies that countries are unable to devalue their currencies in the forex markets. There are several ways of answering this. A liquidity trap implies the central bank cannot inflate, but currency devaluation tends to raise the price level.

We have been taught that “liquidity traps” are all about the zero lower bound on nominal interest rates, but on closer inspection it is actually another zero bound that is crucial, the zero lower bound on eligible assets not purchased by the central bank.

Keynesian objections are:

1. The central bank can only legally buy certain assets.
2. The central bank may be fearful of having a large balance sheet.

Those objections then become the real reason for monetary policy ineffectiveness, not the zero bound.

In order to peg the exchange rate at a lower level they would have to sell so much domestic currency that their balance sheet would swell to unacceptable levels.

Thursday, 19 September 2013

The new money

Hedge funds which gambled on how much money would be recovered from the bankrupt carcass of Lehman Brothers are set to make hundreds of millions of pounds from a full payout to creditors of the European arm.

Five years on from the collapse, payouts to Lehman's creditors in Europe are on course to top 100 percent sometime next year, following a recovery of assets by administrators and legal victories over other parts of the ex-U.S. investment bank.

The collapse of Lehman Brothers on September 15, 2008, plunged the global financial system into chaos. Its European arm, headquartered in London, was the largest and most complex part of the group because it was a hub for trading and investments, spanning asset classes and dozens of countries.

Closing down the business and trying to recover assets for creditors has involved unwinding thousands of derivatives contracts and share trades and figuring out who owns what, making it the most complex bankruptcy of a single entity ever. Original creditors, including hedge funds which had Lehman as their prime broker, banks, and trade suppliers such as a photocopying or legal firms, may not all be winners, however.

Wednesday, 18 September 2013

No split here!

The Lib Dem conference is living up to the title of what next!

Rumours abound of a leadership challenge and there is no shortage of media rhetoric concerning Nick Clegg’s current position, however, there does not appear to be anyone who wants to take the place!!

How on earth can there be a leadership challenge if there are no upcoming leaders waiting in the wings? There are some nice juicy rumblings most notably between Vince Cable and Danny Alexander as their tug of war as the media puts it gets even hotter. If either of these two are approached on the subject of leadership, they become rather distant.

So who is waiting in the wings?

Tuesday, 17 September 2013

What the voters want!

Our political class actively want to be out of step with public opinion, and are sorry they accurately represented it the other day. A survey of Tory MPs revealed that many actually want to vote again on attacking Syria, so that they can authorise this lunacy, even if it is only an incredibly small pinprick with no discernible purpose. And it is not just the Tories. Ed Balls, the Shadow Chancellor, also wants Another Chance To Bomb.

He confided to an elite TV show: ‘Our jaws dropped when the Prime Minister suddenly took the idea of military action right off the table. I wasn’t expecting that, nor was Ed Miliband. If David Cameron is going to put that back on the table, we will look at that.’

Well, if they so fervently want not to represent us, I will say it again.

We do not have to elect these people. I have reluctantly come round the view that we should bring in compulsory voting in this country, provided every ballot paper contains a slot at the top marked ‘None of the below’. And if the numbers voting ‘None of the below’ exceed 30 per cent in any constituency, nobody is elected for that seat. Parliament would get a lot smaller. MPs would become a lot more interested in us and in what we think.

Monday, 16 September 2013

The Liberal Democrats

As you know the conference season has started and these ^^ people do not know whether they are coming or going.

Half of them are saying the worst thing they have done over the last three years is join the Tories, half of them are saying it is the best thing since sliced bread!

Surely they should gather up all the successful polices that have been ratified into statues over the last three years that were a deliberate act on behalf of the Lib Dems and promote them?

I am curious what the keynote speech is going to be about.

Friday, 13 September 2013

erm, why no news?

The Davos economic forum is held every winter in the Swiss Alps, I have just found out about the summer one which is held in China.

The biggest surprise at this week’s Dalian forum was the East-West divergence of opinion on the economic outlook, both in the months ahead and in the very long term. Western economists mostly believe that developing countries in general, and China in particular, are threatened by serious financial crises as U.S. monetary policy begins to be tightened, probably as soon as the Federal Reserve Board’s meeting next week. The consensus view is that emerging economies have invested and borrowed too much, taking advantage of the Fed’s easy money and will now face painful de-leveraging similar to what Europe and the U.S. experienced five years ago. This de-leveraging means, in turn, that the glory days for developing economies are probably over, and most of these countries, perhaps including China, may never escape the “middle-income trap” that has prevented further progress in many developing economies.

Surprisingly, however, the Chinese economists in Shenzhen seemed largely unperturbed by the Western warnings, preferring to concentrate on environmental, governance and public health issues and the details of financial market design. In Dalian, too, the sense of financial foreboding was strangely absent, as speakers from other developing countries agreed with their Chinese colleagues that higher priorities than debt management were structural issues such as demographics and education, governance and corruption, bank regulation and competition, energy and urban design.

If China can manage and control its way to ever-greater prosperity, despite the sudden outbreak of skepticism among Western analysts, the same will probably be true of many other emerging economies, which increasingly look to China, instead of the West, for support and guidance.

Thursday, 12 September 2013

Economics of austerity

Paced by housing and energy, the U.K. recovery is likely to accelerate this year and budget deficit projections have declined as well. Unfortunately the European economy remains stagnant though there is some evidence that 'stimulative' policies are gaining traction in Japan. Around the world the idea of “austerity” is fiercely debated. This all makes a reconsideration of the principles that should guide fiscal policy opportune. This requires recognising that policies need to be set in light of economic circumstances.

A prudent government must over time seek to balance spending and revenue collection in a way that assures the sustainability of debts. To do otherwise leads to instability and needlessly slow growth and courts default and economic catastrophe. Equally, however, responsible fiscal policy requires recognizing that when economies are weak and movements in interest rates are constrained as has been the case in much of the industrial world in recent years changes in fiscal policy will have significant effects on economic activity that in turn will affect revenue collections and social support expenditures. In such circumstances, aggressive efforts to rapidly reduce budget deficits may actually backfire, as a contracting economy offsets any direct benefits.

It is a truism that deficit finance of government activity is not an alternative to tax finance or to supporting one form of spending by cutting back on another. It is only a means of deferring payment for government spending and, of course, because of interest on the debt, increasing the burden on taxpayers. A household or business cannot indefinitely increase its debt relative to its income without becoming insolvent, and neither can a government. There is no viable permanent option of spending without raising commensurate revenue.

Wednesday, 11 September 2013

Let the economic arguments begin...

George Osborne has just said "I told you so".

What the speech gave was higher than predicted growth now proved, he claimed, that the cuts did not strangle the recovery as Labour had said they would. Next he insisted that the recovery was not based on "the wrong sort of growth" that is, a return to spiralling house prices and consumer debt. Finally he argued that it was only by sticking to current economic policies that living standards will be raised.

What George Osborne doesn't want you to know about the economy:-

1. This is still the slowest recovery for more than a century
2. The economy is 2.9% smaller than before the crash [the US is 4.5% larger]
3. Unemployment hasn't fallen for six months and underemployment is at a near-record high
4. His deficit reduction plan failed and he's forecast to borrow £245bn more
5. Most people are still getting poorer and that won't change soon

Tuesday, 10 September 2013

Botched vote

Even before the Syrian crisis the question was, is Ed Miliband the most disliked leader in recent British history? No-hopers ranging from Michael Foot to Iain Duncan Smith failed to attract such odium, while the loathing directed at Margaret Thatcher and Tony Blair was always balanced out by worship.

Ed Miliband, by contrast, is attacked from all sides. As Labour critics worry that his policies are imprecise and his vision hazy, David Cameron has seized on his opponent’s failure to project a clear public image, painting him as weak. Such objections are minor, however, compared with the widespread wrath unleashed by Labour’s role in blocking any chance of military action in Syria.

Blaming Mr Miliband serves, ironically, to bestow upon him the very power that his enemies claim he lacks. The country is crying out for statesmanship, and the Labour leader will have no better chance to silence his critics. Much as he might prefer to focus on British living standards, voters may judge the calibre of their leaders by what they have to offer the Syrian refugees fleeing with nothing and bound for nowhere. Both Mr Cameron and Mr Miliband are self-professed upholders of public virtue, explicitly committed to creating a better society. No wonder that the public, detecting a whiff of double standards, reviles the political classes.

Today Mr Miliband is making a keynote speech to the trades union conference, will this be strong enough to turn the tide? It was Mr Cameron who failed to get the vote passed the previous week, let's not forget.

Monday, 9 September 2013

The tail wags the dog

The unions have started to reign back their contributions to the Labour party and the Labour party now says that there was no impropriety at the Falkirk selection process!

Friday, 6 September 2013

End Syrian conflict

The G20 is in full swing and rather than discuss world poverty they are chatting about Syria, and chatting is about as strong as it gets. There are two sides, let’s go in and bomb the shit out of them and the do nothing side. Neither of these two sides are remotely close to an agreement.

Then I heard someone [whose name I have sadly forgotten] from the UN yesterday say that one way to stop the current aggression in Syria is to get the supplies of arms on both sides to cease supplying.

Well who are they?

For the government it is Russia & Iran and for the opposition it is Saudi Arabia & Qatar. Can the UN talk to these four countries and get them to stop?

Thursday, 5 September 2013

Universal Credit

A devastating report from the public spending watchdog has said it [the IT programme created to control UC] has been beset by "weak management, ineffective control and poor governance". The National Audit Office said the government had embarked on the flagship project without knowing how it would work. We are back to the bad old days where projects are not given tests to prove whether they are worthy of development. Although it appears it is even worse than that and for the last three years the only reports coming out of the IT team have been good ones where all the bad news has been suppressed. How is this not corruption?

A lot of figures have been thrown round today and I do not have access to the inside details, but when a government body produces a report that states the left hand has no idea what the right hand is doing and the mind in the middle has given permission for a project to proceed where there is no path for it to follow, it beggars the question who knows what and why are you spending tax payers money on it?

The auditors found the IT system could not identify potentially fraudulent claims, meaning manual checks were needed on claims and payments. "Such checks will not be feasible or adequate once the system is running nationally".

Citizens Advice chief executive Gillian Guy said: "Even as Universal Credit is being rolled out, we still do not know what support will be put in place to help people to move on to the new system." <<< more disaster waiting to happen…

Wednesday, 4 September 2013

Monetarism lives!

Keynesians often regard monetarism as a relic of the 1970s, with no real presence in the modern world. In one sense that is true. But in another sense it could not be more wrong.

Bennett McCallum is a long time proponent of a policy rule that would adjust the monetary base in such a way as to stabilize GDP growth. Ideas have consequences. He published his proposal way back in 1980. Don’t let anyone tell you your plan is “politically unrealistic.” If it’s the right thing to do keep fighting for it relentlessly.

Japan is the only developed country where GDP growth in 2013 has recently been well above the 20 year trend, but to get there we would have to have the last 5 years again for another 5 years...

Tuesday, 3 September 2013

I used to support Jamie Oliver

Jamie Oliver has made the news a number of times this week, perhaps not unrelated to the fact that he has a new book out. On Tuesday he claimed the poor were spending their money on ready meals and large plasma televisions rather than on nutritious cuisine. On Wednesday he then lamented young British workers who were, he said, “whingeing” and “wet behind the ears”. He went on to unfavourably contrast them with their Eastern Europeans, who are apparently putting in 18-hour shifts without so much as raising an eyebrow.

Jamie Oliver’s curiosity as to why the poor appear keener on dining out at the local chippy than staying in and eating rotten bread and homemade potted duck received a great deal of [largely disparaging] media coverage. This is as it should be, for as George Orwell explained in The Road to Wigan Pier, “The ordinary human being would sooner starve than live on brown bread and raw carrots. And the peculiar evil is this, that the less money you have, the less inclined you feel to spend it on wholesome food.”

Jamie Oliver may well boast that when he was in his 20s “the average working hours in a week was 80 to 100”. The mistake is the corresponding assumption that the proceeding reduction in labour time and its replacement with leisure has been in any way a bad thing. As well as 100-hour weeks, for much of Oliver’s 20s there would also have been no minimum wage and prior to that no effective laws preventing employers from discriminating against disabled workers.

Working 100-hours a week is what happens when employment protections are insufficiently strong and employers excessively greedy. The fact that migrants from developing countries are often happy to work in scandalous conditions in no way makes those conditions acceptable. It means there is work to be done in educating migrant workers on what to expect in the workplace, as well as in schooling them in effective union organisation so as to take a bigger share of the pie from multi-millionaire employers like Jamie Oliver.

Monday, 2 September 2013

The special relationship

It is perfectly obvious now after the weekend that there will NOT be another debate or vote in Parliament concerning Syria. However, what is more concerning is the view that both sides of the Atlantic have of each other!

We in Great Britain seem to think that all bets are off and the Americans hate us. The reality it seems could not be further from the truth. Rather than the old fashioned “poodle” idea most Americans consider our relationship to be peer-to-peer, where it is natural to consider each sides argument. So the Americans  neither lead nor follow us rather they view our opinions and decisions and then consider their own.

Perhaps we should do the same…

Friday, 30 August 2013

Economath - what is it?

Sturgeon’s Law definitely applies to economics, and when it comes to elaborate mathematical models you probably want to up the percentage.

There was an old tradition arguing that increasing returns made the case for infant-industry protection, underlying this tradition was the intuitive notion that increasing-returns industries are the “good stuff” you want to get, and keep away from other countries.

But that was not at all the point of New Trade Theory, which ended up suggesting that concentration of production due to increasing returns is generally beneficial to importers as well as exporters of increasing-returns goods, that it generally reinforced the case for open trade, rather than undermining it.

All that said was, there is a lot of excessive and/or misused maths in economics, plus the habit of thinking only in terms of what you can model creates blind spots.

Thursday, 29 August 2013

Hi Tech malarkey

I am not a tech industry maven, so I am busy coming up to speed on the implications of the Ballmer resignation. What I’m about to say may be obvious to many. Still, I think it is worth saying: there is, once you look past the surface, a remarkable symmetry between Microsoft’s strategy in its heyday and Apple’s strategy today.

The Microsoft story is familiar. This dominance persists to this day. But Microsoft missed the boat on mobile devices, while Apple got temporarily ahead of the curve.

Now, unlike Microsoft, Apple isn’t selling an inferior product. But it’s selling products that are little if any better than competitors, at premium prices. How can it do that? Again, network externalities, mainly a much deeper bench of apps, or so I’m told [I actually don’t use any].

So how do the prospects for Apple’s reign look compared with those of Microsoft? Let us not forget that Microsoft is actually an incredible success story, it maintained its PC lock for decades, and in fact still retains that lock today, it is just that the market is changing.

Wednesday, 28 August 2013

Syria has consequences

Now we have a new situation as the west has decided on punitive action. We do not know what this action is to be yet, although we do know what some of the consequences might be.

One of the factions that has been attacking the Syrian government over the last two years is Al Qaeda and it is possible that the locals in the region [Middle East] will see the this punitive action as siding with the rebels. Now that cannot be good!

Also what exactly are they going to bomb?

Not civilians naturally, but then do military targets make sense, when we know have evidence of the Syrian government having chemical weapons. Surely if military targets are hit and include stock piles of these chemicals the reaction on the ground will be mayhem.

If parliament sanctions the hit and it takes place, then what next?

Tuesday, 27 August 2013

Syria finally

A very strong statement from America yesterday seems to hint at aggressive action from the west is imminent. This has come about because of last Wednesday’s chemical attack.

Now, after more than two years of bombardment of domestic suburbs where hundreds of thousands of people have died, action is to be taken. My question is, why is it acceptable to the west to stand by and do nothing while hundreds of thousands of people die over two years where the protagonist is using traditional armaments?

Monday, 26 August 2013


Ed Miliband is in a difficult place, if he stands against the outrageous rising cost of HS2 which has no evidence of producing the necessary gains claimed, his shadow cabinet will be a bit miffed as most of the constituencies affected are conservative and consequently will probably rebel during the 2015 election and if he goes with the flow he will be accused of falling into the high brow view of the outer class and have the short sighted view of someone out of touch.

I suppose he will stick with plan A and do nothing.

Heading deeper into the detail of HS2, where do the facts come from that extol the virtue of a project heading towards the unfathomable cost of 100 billion pounds sterling?

Friday, 23 August 2013

Housing boom & bust

The new housing scheme I mentioned earlier

appears to have been more successful than expected as house prises are rocketing.

Is that a good thing? I think not!

What happens after booms, busts, exactly.

The bust will not happen before 2015 so the new housing scheme is a cynical short term short sighted plan by the coalition which just wants to extend it's own time in government.

Thursday, 22 August 2013

Long term plans need better thought

Last week Mark Carney said that 0.5% base interest rates would continue until 2016, as that was the suggested date for below 7% unemployment, all I can say is oops.

The latest unemployment figures show a trend that suggests unemployment will be below 7% much quicker than that, so are rates fixed for three years or will there be some back peddling?

Inflation does not seem to be a priority any more, I wonder if that will change?

Wednesday, 21 August 2013

Egypt aftermath

Violence is never good or the right answer, so what is?

Let us take a step back, 18 months ago an allegedly democratic election was held and one party won. 12 months later the country as a whole rebelled against that democratically elected government, and the army "was invited" to remove it.

First and foremost this is not how we do things in the west, so we are struggling to fully understand the situation. Secondly how does a party win an election, by having the most votes. If the people who voted for them have changed their mind, why not vote for someone else? An extremely simplistic question whish I feel does not currently have an answer.

If we go back to the election we can see something striking that was not enlarged on at the time, and that is there was only two parties running. The Muslim Brotherhood led by Mohamed Morsi and the national party led by Ahmed Shafik who happened to be the Prime Minister under Hosni Mubarak, so perhaps the people did not have a choice as you and I know it as they did not want Mubarak’s regime back, so they voted for the only available option. With hind-site we can see that it will not end well, and if we look at the media we can see in Egypt today on the streets it is not ending well.

More importantly why has the military government now decided that the Muslim Brotherhood is a terrorist organisation? To please the people allegedly. This does not bode well for the future.