Wednesday, 31 July 2013

Spanish train crash

It is no good vilifying the train driver if his equipment was not fit for purpose.

In today's technological marvel of a world, are we not surprised that it is possible for a human to override a machine for his/her own purposes? I think not! However, the machine has to have procedures in the first place that can be overridden!

Lot's of speculation has been around since this tragedy last week and only an investigation will answer most of the questions, my only question is "has this driver been along this route before?". The reason for the question would be to ascertain whether his/her knowledge of the route would aid the decision making process. If it turns out that this driver has completed this route dozens of times successfully, then why on this occasion travel at twice the recommended speed?

Francisco Garzón, the driver of the train involved in Spain's worst rail disaster in almost 70 years was freed on bail on Sunday night after reportedly admitting to a judge that he had behaved recklessly.

Is that it then?

Tuesday, 30 July 2013

Market surprise

It’s very likely that professional investors are aware of specific research that points toward a massive market correction, as much as 90%.


The stock market is still in the midst of its historic rally. Real estate prices have finally levelled off, and for the first time in five years are actually rising in many locations, and the unemployment rate seems to have stabilized.

What makes me think this is happening now?

Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate, he has sold 19 million shares of Johnson & Johnson.

John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks as well, he has sold 14 million shares of JPMorgan Chase.

Now billionaires don't stay rich by making mistakes...

Monday, 29 July 2013

Egypt bitterly divided

How did the Muslim Brotherhood under Mohamed Morsi get elected 12 months ago by a majority of the populace considering what is happening today?

Egyptians remained deeply divided over the future of their country Sunday, with no sign of an end to clashes between rivals groups that left at least 72 dead last Saturday. However, this does seem to the west to be one-sided, as the only people being injured appear to be supporters of the Muslim Brotherhood.

Supporters of the Muslim Brotherhood said they would not leave the streets despite what they called "massacres" by security forces that shot dozens of them dead.

The west has asked for a full public enquiry, the Egyptian military have waved the suggestion aside.

What I still do not understand is, if over half the 80 million people in Egypt voted for the Muslim Brotherhood twelve months ago, [in elections that at the time were said to be trouble free, independent, democratic and free of corruption] where are they now?

Friday, 26 July 2013

British growth party

The ONS [Office of National Statistics] has announced that the British economy grew by 0.6 per cent in the last quarter, sparking suggestions that the economy may be coming out of its slump. It compares favourably to the mini-slump the country was in this time last year, and is the third best quarter Britain has seen since the recession.

Should we running down the street with our pants on our head revelling in the good news? I think not.

The failure to bring the economy back to where it was pre-recession lies almost entirely on the back of the Government. A recent study estimating the effects of austerity on growth found that GDP [Gross Domestic Product] was 3 per cent lower than it would have been if the Chancellor hadn't attempted to slash the state. That difference works out to £3,500 for every household in the country.

However, is that right. It appears to be a very small view on what has been happening over the past five years since the global economic crisis, and remember this is global, but the figures refer to the British position. Are we yet again confusing one situation with another by blurring the details of local and global?

I believe GDP is too small a sample of financial data to predict an uncertain future and there should be more tracking of median household economic data to build a fuller picture.

Thursday, 25 July 2013

The work programme

The government's work programme doesn't look well administered as an under spend is not always good news.

Tony Wilson, policy director at the Centre for Economic and Social Inclusion, reports that the Work Programme, the controversial government scheme which pays outsourcing firms to get long-term unemployed people back in work, has come in £225m under budget. The Youth Contract, a related programme which focuses on young unemployed people, came in £300m under budget.

That sounds good, and likely will be spun as good by the government, when the time comes to release the figures, but it's actually yet more evidence of the mismanagement of the entire scheme. The Guardian reports on the public accounts committee's analysis of the programmes:

The report said that providers complained they "did not have the funding to provide the level of support they wanted". It added: "Particular issues reported as resulting from a lack of funding included an inability to pay for interpreters and for participant transport in rural areas. Some subcontractors felt this also had an impact on their ability to meet the needs of particular groups of participants."
Another provider said that due to the high numbers of unemployed people needing help too often "support was provided online or in group sessions, with one-to-one support used only where necessary".

When a programme is being condemned for a lack of funding at the same time as not even spending the budget it's been given, it's hard to imagine it's being particularly well administered. Of course, given that against the best counterfactuals, it looks like the work programme is less effective than doing nothing at all, that shouldn't be a huge surprise.

Wednesday, 24 July 2013

Has China's bubble burst?

All economic data are best viewed as a peculiarly boring genre of science fiction, but Chinese data are even more fictional than most. Add a secretive government, a controlled press, and the sheer size of the country, and it’s harder to figure out what’s really happening in China than it is in any other major economy.

Yet the signs are now unmistakable: China is in big trouble...

It’s all very peculiar by our standards, but it worked for several decades. Now, however, China has hit the “Lewis point”, to put it crudely, it’s running out of surplus peasants.

That should be a good thing. Wages are rising; finally, ordinary Chinese are starting to share in the fruits of growth. But it also means that the Chinese economy is suddenly faced with the need for drastic “rebalancing”, the jargon phrase of the moment. Investment is now running into sharply diminishing returns and is going to drop drastically no matter what the government does; consumer spending must rise dramatically to take its place. The question is whether this can happen fast enough to avoid a nasty slump.

And the answer, increasingly, seems to be no. The need for rebalancing has been obvious for years, but China just kept putting off the necessary changes, instead boosting the economy by keeping the currency undervalued and flooding it with cheap credit. [Since someone is going to raise this issue: no, this bears very little resemblance to the Federal Reserve’s policies here.] These measures postponed the day of reckoning, but also ensured that this day would be even harder when it finally came. And now it has arrived.

Tuesday, 23 July 2013

America goes back half a century

On the day George Zimmerman was acquitted for the murder of Trayvon Martin, young black men of all classes, professions and character were forcefully disabused of the luxury of denial. They were reminded, once again, that it doesn’t matter if they walk fast or slow, fight back or run, if they are guilty of a crime or not, in the eyes of the law they can be shot down in the street and no one will be held accountable.

Don’t underestimate the strength of this desire to believe that the world is just. It is so strong it cannot coexist with the blatant evidence of injustice presented by Zimmerman’s acquittal. The reality, which is there for all to see, must be somehow deflected, mitigated or denied. And the starker the example of injustice, the stronger is this desire to deny it.

Of course it is rather difficult for me to throw stones without hitting some British glass!

The attempt to smear black victims of crime is not unfamiliar. There is evidence to suggest it happened in the cases of black British men including Stephen Lawrence. These cases differ in many specifics, after all these men were all different people with different lifestyles and back stories and characters. It is not the families’ campaigns for justice which seek to erode the distinctions. It is a legal system which believes that all black men are criminals and that the killing of a black criminal is always justifiable.

No matter which way you look at this situation, it is not good...

Monday, 22 July 2013


How does a city go bankrupt?

Well, actually that is an easy one, they over spend, it is not rocket science, the real question is why?

Detroit was a booming city with nearly 2 million people and as it increased local services increased, however it has a tenth of that population now but unfortunately public services are still the same, hence ludicrous debt.

Why did the local council or whatever it is called in America scale back accordingly, because "councils don't do that!" Well they have learned their lesson now, or have they? The amount of debt in Detroit has just escalated to bankruptcy which is a staggering statement of an America city.

This was once the capital city of capitalism, the great roaring furnace at the very centre of America’s rise to world power and greatness. Stalin wanted to copy it on the banks of the Volga, but found he couldn’t replicate its spirit, or its cars. Aldous Huxley’s great prophetic novel Brave New World was written on the assumption that the ideas of its founder, Henry Ford, especially that ‘history is bunk’, would one day take over the planet. He may yet turn out to be right. Certainly, Ford’s desire for a world of vast mass-production factories in which the workers were paid enough to keep the economy going by buying their own products seems to be coming true.

Now, true to its past, Detroit is not just fading away gracefully, but noisily sick and dying, expiring as spectacularly as it once lived. Fifty years ago it was the fifth-largest city in the United States, with 1.85 million people. Now it is eleventh, with just over 700,000 people. It is likely to fall further behind as it shrinks, and as more Americans head for the Sun Belt and the flourishing South West where the work is...

Friday, 19 July 2013

Interest rates are still a bad indicator of monetary policy

A small rise in short term rates can do a lot of harm, and in economics that was a point that conservatives emphasized [conservatives the type not the political party].

Even small increases in interest rates in the US [1937], Japan [2000 and 2006], and Europe [2011] drove each economy right back into deflation and/or depression.

Monetary policy has probably become easier over the past few months, because we lack a GDP futures market. But consider that stock prices have not changed much in the last few months, and the interest rate at which future cash flows are discounted has risen substantially. We can infer that expected future nominal cash flows are now larger than a few months ago. This doesn’t mean that expected future GDP has risen, but that seems likely.

I’m still puzzled by the response of long term rates to the tapering talk. But if long rates always moved the same way in response to monetary news, then interest rates would no longer be a bad indicator of monetary policy.

Thursday, 18 July 2013

Local surprise

The Labour party celebrates after winning a seat off the Greens in one of the safest wards in Lucas's constituency.

There was a dramatic local by-election result in Brighton last night, where Labour won a seat off the Greens in the Hanover and Elm Grove Ward, one of the safest in Caroline Lucas's constituency. The party's Emma Daniel took the seat by just 38 votes (1,396 to 1,358) but this represented a huge swing of 11.7% since 2011.

It would be a mistake to read much into the result, a reflection of local discontent with the Green council, which Lucas herself has protested against in response to pay cuts. But it is a reminder that there is no guarantee she will keep her seat in 2015. Lucas currently has a majority of 1,252 (2.4%), with Labour, which held the constituency between 1997 and 2010, in second place.

Brighton Pavilion is one of Labour's 106 target seats apparently [the 19th most marginal on the list] and with a hung parliament looking increasingly likely, the party has no intention of giving her a free run.

Wednesday, 17 July 2013

Inflation and Unemployment

Want to know what an MP cares about? Look at their pay packet.

Details released by IPSA show MPs pay in real terms over the last hundred years. Since 1911, when it was introduced at a rate of £400 per year, the pay of elected representatives has fluctuated between six times, and one and a half times, the average wage in the UK. It currently sits a little over two-and-a-half times higher.

Everyone earning a salary is hit by inflation to some extent. But MPs are in the category of workers who are hit hardest. They don't have the annual pay rises typical in many industries; they have no ability to negotiate individually in response to changed circumstances; they can't leave for a better paid job without completely switching industry. And that's even before you take into account the unique peculiarities of their situation: asking for a pay rise due to inflation is a bad idea if the inflation is seen as your fault to start with.

All of which means that the economics of being an MP are directly aligned with a tendency to over-value inflation, and undervalue growth, in setting priorities for the country. In so far as the new Governor of the Bank of England, Mark Carney can fight that consensus, he should, but IPSA could have a role to play as well. In deciding what to do with MPs pay, they could look at a wider economic index of how the country is doing. That way, MPs would know that getting their dinner relies on everyone else getting theirs.

Tuesday, 16 July 2013

Should the tax payer fund political parties?

Labour, the Tories and the Lib Dems must reinvent themselves as mass-membership organisations.

The political party is dying. As older members pass away to join the great returning officer in the sky, they are not being replaced by new, young recruits.

Back in the 1950s, belonging to a political party marked you out as slightly odd. More civically engaged than the average citizen, if you want to be nice about it. If you want to be less kind, an obsessive. But at least then, when the combined memberships of Labour and the Tories could be measured in millions and even the old Liberal party could rustle up 250,000 paying supporters, the minority you belonged to was a substantial one. Even if you didn't carry a card yourself, most people probably knew someone who did.

As parties shrivel to a very small hardcore of the ultra-committed, one consequence is that they become less and less representative of the wider population. That makes them even more cut off and even more difficult for leaders to lead. Consider the convulsions that the Conservative party has been through over same-sex marriage. The polls tell us that the average voter is not all that fussed by the issue. On balance, they are positive and they are more likely to support gay marriage the younger they are. The one exception is elderly people. Most are against and many are passionate in their antagonism. David Cameron's basic problem with gay marriage is the average age of a Tory party member.

We do not like the idea of unions dominating Labour, we do not like a few millionaires controlling the Conservatives and we do not like the idea of tax payer funding of political, however, it is the lesser of three evils...

Monday, 15 July 2013

BBC payoffs

The BBC get it wrong again!

We are forever hearing that Auntie Beeb is one of the institutions cherished most by the British public, admittedly usually from the BBC itself. Now a YouGov poll has found this to be a myth.

36% think BBC programmes have got worse over the last ten years

23% see an improvement

48% say the licence fee offers bad value for money

72% slam them for paying executives too much

70% say TV and radio presenters are paid too highly as well

Perhaps most worryingly for Lords Hall and Patten as they face the Public Accounts Committee:-

69% want a police investigation into possible criminal wrongdoing in BBC severance pay...

Friday, 12 July 2013

G4S needs to be closed down...

The Olympics of 2012 was nearly brought to it's knees by a company called Group Four Services [G4S] who were supposed to supply security for the games. When the crunch came and they failed, fortunately for us the Army stepped in and saved the day.

It was decided by a select committee that G4S had been negligent, disorganised and incompetent rather than deceitful.

However, this time they have been claiming fees for tagging people who do not have tags, are in prison or even DEAD! This is not incompetence, it is deceit, wilful misconduct, theft and I suppose after a few months another committee will say "tut tut - don't do it again". This has to stop. What is the difference between G4S and the Mafia? G4S do not walk round in tin foil suits.

MP's must realise that THEY are the ones who look stupid every time a situation like this arises and the more the media lets us know the more information we have at hand for the 2015 elections.

p.s. the civil service discovered this in 2008 and have covered it up as usual, the SFO [Serious Fraud Office] is getting involved but I doubt any mandarins will be caught...

Thursday, 11 July 2013

Is our political system is breaking apart - Part II?

Could either Labour or the Conservatives break apart?

Traditionally the costs of establishing a political party and a hostile first-past-the-post electoral system, which makes it difficult for newcomers to gain electoral traction, has prevented this happening. But UKIP’s recent success is perhaps showing that it is possible to break the mould [although Nigel Farage still has to translate opinion poll results into actual seats].

Yet beyond the philosophical differences within our main parties lie deeper structural problems. Membership and participation levels have tumbled to all-time lows. Even allowing for a spike in new members following the 2010 defeat, Labour’s total is now half what it was in the mid-1990s. The Conservatives, with two million members in the 1950s, are now down to a tenth of that figure, with around 180,000 today. Meanwhile UKIP, with 30,000 recruits, is on course to overtake the Lib Dems, who have lost 35 per cent of their members since entering the coalition.

The emergence of a four-party system could see Labour win the next election with as little as a third of the popular vote, a prospect that should horrify party strategists, with "one nation" politics becoming a hollow boast if two-thirds of the electorate back other parties. But the rot goes far deeper than just the state of our parties. As few as six out of ten people now bother to vote in general elections, with the Electoral Commission warning that at least six million people are not registered to vote at all!

The Tory right and the purists of the anti-austerity left are easily dismissed as unrepresentative ultras, but their very existence and their growing strength serves to tell us that our stable, predictable system of party politics is now breaking apart.

Wednesday, 10 July 2013

Is our political system is breaking apart?

The growing strength of the Tory right and the anti-austerity left suggests our stable, predictable system of party politics may be coming to an end.

For 80 years, our system has accommodated large, conglomerated parties of the centre-right and centre-left, a small liberal party and assorted nationalists and unionists. This settlement has proved remarkably resilient in seeing off pretenders before, most notably the Social Democratic Party in the early 1980s, but the edges are now starting to atrophy, leading to fractiousness and fragmentation.

It starts at the edges but it really affects the centre, with powerful disintegrative forces pulling the two main parties towards the extremes, with centrists in both parties clinging on for dear life. As the Tories leach support to UKIP, Cameron moves rightwards to counter their advance.

Labour meanwhile, faces a different challenge. It doesn’t have to counter an exogenous threat; recent events focusing on Unite’s modus operandi in parliamentary selection battles shows its problems are closer to home. The duty of trade unions to represent their members’ interests sees most reject austerity. This will become increasingly at variance with Labour’s more pragmatic approach as the party begins the process of staking a claim to the centre-ground and detailing its plans around deficit reduction and governing a radically downsized state.

Tuesday, 9 July 2013

Will Nationwide be forced to become a bank?

Nationwide has important, totemic status among the mutual’s, in that it is the biggest of them by far, and it battled through the great crash of 2007-08 relatively unscathed. Changing it’s status would be very bad news for the future of mutual building societies. Which is one reason why many politicians and commentators posited that mutuality [ownership by customers rather than by conventional investors] might be the way forward for retail banking.

The recent financial woes of mutually owned Co-op Bank, and its forced decision to obtain a listing on the stock market, show that reports of a mutual revival were premature, to say the least. And Mervyn King's last act as Bank of England governor, which was to encourage the unexpected decision of the Prudential Regulation Authority's board in favour of early introduction of a tough new leverage ratio, is another blow to the mutual movement in finance.

Imposition of a 3% leverage ratio, and the possibility that this could be increased at some point to 4% - which is what the Vickers Commission wanted - poses both a short-term and a long-term problem for Nationwide.

All banks have to meet what is known as a capital adequacy ratio, set by the notorious Basel Committee, which is the ratio between loss-absorbing capital and loans weighted by risk. Loans made by the Nationwide and other building societies are primarily prime residential mortgages, which are seen by regulators as low risk.

Here is perhaps Mr Carney's first challenge: Can he help Nationwide to remain as a mutual, and thereby give hope to those who believe in mutuality?

Monday, 8 July 2013

What is really happening in the economy

Growth was so uneven in the first three months of 2013, with March a lot stronger than January, that the economist Geoffrey Dicks actually thinks the second quarter estimate could be a lot higher - even as high as 1%. But even growth of 0.5% would be the fastest we've seen in nearly two years [if you ignore the heavily distorted period around the Olympics].

Growth at an annualised rate of 2% would not usually be a cause for such celebration. And the recent revisions to past GDP data mean we are even further from our 2007 level of output than previously thought. UK living standards - real GDP per head - are now 7.6% lower than at the end of 2007. At this stage in past recoveries, income per head has typically been about 8% higher than when the downturn began.

The Office for National Statistics now reckons that households saved 4.2% of their income in the first quarter of 2013. That's down from 7.4% the year before, and the lowest in four years. Figures out today from the Bank of England show that households, on average, increased the amount of equity in their homes by £8.8bn in the first quarter of 2013.

That does not feel like a very solid basis for the recovery, when most people's earnings are still falling, in real terms, and households are still sitting on a large amount of debt.

Friday, 5 July 2013

BBC Blows £25 Million on Golden Goodbyes

150 top-ranking staff were given the huge severance payments over the last three years. George Entwistle pocketed £470,000, as well as £107,000 for costs for appearing as a witness at the Pollard Review. The other big winner was Chief Operating Officer Caroline Thompson, who trousered £683,000. In one in four cases the Beeb paid out more than they were entitled to…

Tory MP Rob Wilson told the Telegraph:

“I have therefore written to the National Audit Office today asking whether it has further information it can share about the process by which pay-offs were made and whether any element of fraud or other criminal wrongdoing associated. Based on the reply I receive, I will consider whether there are grounds to refer this matter to the Police.”

Glad to see the TV Licence is being spent wisely...

Thursday, 4 July 2013

The next election

Reflecting on last weeks political statements it now appears that the next election battleground will be benefits, as all sides are gearing up for the battle.

In the wider struggle for advantage, however, the Political Chancellor has been outflanked by the Shadow Political Chancellor. The Spending Round on Wednesday was the Political Chancellor's attempt to trap the Labour Party into saying that it would spend and borrow more than the Government. But Ed Balls saw that trap from many months off and, unusually for a Labour politician, decided to go round it.

We still have to ask ourselves if Labour will start spending the day they get office?

Wednesday, 3 July 2013

Egypt today

I do not understand what is happening in Egypt today. Let us compare their country with ours.

Hypothetical situation:

10 million people in England go on the streets with banners saying "the PM must go", okay it is very unlikely but heh, I am trying to get a handle on this.

David Cameron makes a statement like Mohamed Morsi, typical political statement proclaiming all the good things he and his party have done and all the things they are about to do. This does not satisfy the people and the next day 20 million take to the streets with similar posters.

So the head of the army General Sir Peter Wall makes a statement saying that if David Cameron does not step down, they will step in. This is where it gets a bit flaky for me. This would probably never happen as technically they are on the same side. so let us step back a bit.

How did the two political statements differ?

Well I do not unfortunately have a full and accurate translation of what Mohamed Morsi said, but the media says he used strong rhetoric towards his aggressors and a vehement refusal in letting go. But did he state any of the achievements that he and his party had done in the last twelve months? I do not know, but this is where our path differs.

I do not believe 10 - 20 million people would march on the streets asking for David Cameron to step down, because of the achievements the coalition has made. I also believe that twelve months for the first democratically elected leader is not enough time to denounce someone as a failure, it is unfair, so I have to assume there is something else behind the situation in Egypt today.

Tuesday, 2 July 2013

MP pay rise

MPs' are about to get a 10k pay rise!

David Cameron will have more difficulty defending MPs' pay rises than anything else he has had to deal with recently. Sir Ian Kennedy, head of IPSA [Independent Parliamentary Standards Authority], is due to deliver his report to parliament this week suggesting MPs on £66,396 [[excluding those dodgy expenses such as mortgage support]] are vastly underpaid, and should earn £85,000 if the Commons is to attract more talent. Realising a £20,000 pay rise would cause such a public outcry that it could turn Parliament Square into Tahrir Square, Kennedy is widely expected to offer a compromise figure of about £10,000.

But even a £10,000 rise would make a mockery of David Cameron's claim that in Austerity Britain 'we are all in it together'. Chancellor George Osborne last week announced an end to automatic pay rises for civil servants and is facing union anger over his insistence that public-sector workers stick to pay rises of 1 per cent.

The former Tory leadership challenger, David Davis, reflected the mood at the top of his party when he said it was "completely inconceivable" that his or any other party could be seen to be even considering such a pay rise just as the government was telling the country to tough out a few more years of austerity. "I don't see how we could ever again even think of uttering the words 'all in it together' if we accepted this. Snowballs in hell and cows jumping over the moon come to mind. It can't happen."

However, David Cameron is not in a position where he can either stop or alter this process as it is independent!

Monday, 1 July 2013

Egypt - Arab spring II

According to reports coming out of Egypt, over 22 million people have signed a petition asking for President Morsi to step down.

That is a huge statement of no confidence and I would be surprised if he could resist this. I am glad that the protests taking place have been relatively free from violence so far, although there are a lot of army movements at all the major centres.

Remember that President Morsi was elected by the people and not a military puppet, and it has only been a year, if the people are this mad, what can be the reasons?

Worsening safety for women, breakdowns in the rule of law, crackdowns on cultural activity and police abuse - the Arab Spring wasn't meant to end like this.