Sunday, 31 August 2014

World growth

I always thought that China was in place to overtake the west with recent growth patterns, however the world bank says the experts have been getting carried away with bogus data using PPP [Purchasing Power Parity] rather than on actual exchange rates.

PPP based measures of GDP [Gross Domestic Product] (per capita) might make sense if we want to measure how much an average citizen can buy for given an average income, however, it does not make sense when we want to measure the size of the economy. There we have to use measures based on actual exchange rates and if we do that then it turns out that the Chinese economy is still significantly smaller than the UK or US economy.

My argument is that it makes no sense to use nominal exchange rates to compare the size of economies. Perhaps it makes sense if you want to look at the impact on global trade [China exports far more than the UK or US], but surely not if comparing domestic production. Take the US as an example, I recall the Euro being about 85 cents around 2002, then by 2008 it peaked around $1.60, and yet the US and Euro zone had roughly similar NGDP [Nominal Gross Domestic Product] growth rates over this 6 year period. Does anyone believe that comparing non-PPP adjusted GDPs would have given a meaningful comparison of the relative size of these two economies? Did the Euro zone suddenly go from having an economy much smaller than the US to one far larger, in six years? Maybe.

Now consider the effect of tax regimes. Suppose you adopt a VAT that provides revenue equal to 20% of GDP. Your nominal GDP at market exchange rates will suddenly jump by 20%, even though nothing has happened to the real size of your economy. Indeed the European VATs are one factor that explains why Europe often looks better against the US if you don’t adjust for PPP.

Saturday, 30 August 2014

Ashya King

I have just read that an arrest warrant has been issued for Ashya King's parents!

Unless I have missed something, I thought Mr & Mrs King had taken Ashya from a hospital against medical advice, not advisable perhaps, but an offence! What offence?

I have no idea why they did it and I am not going to pre-judge as I suspect there is more to it than has been reported, but is it really possible to arrest someone from taking a relative out of a UK hospital?

I am stunned.

Friday, 29 August 2014

The crumbling conservatives

Yesterday Tory MP Douglas Carswell announced at a special press conference that he is defecting to Ukip.

The Tory whips move into action mode by saying that the Conservative party will contest the by-election vigorously, to ensure that the people of Clacton have a strong Conservative voice in this Parliament and the next.

As well as saying his decision is regrettable and counterproductive, the other Tory response to this morning’s shock defection by Douglas Carswell is to point people to instances where Carswell has said that only David Cameron as Prime Minister in 2017 will guarantee a referendum. It is clear that Douglas Carswell no longer believes this to be the case, so much co that he is prepared to leave the party he has been fighting for to join another.

Douglas Carswell’s defection today to Ukip is terrible for David Cameron. But it is also deeply inconvenient for his band of eurosceptic brothers. He was a key member of a powerful ‘cell’ of MPs who met regularly to discuss strategies for pushing the Conservative leadership further on European policy.

But what happens to that eurosceptic cause now? They had been discussing how to get more detail out of the Prime Minister, and presumably Carswell had been a block to any ‘shenanigans’ on this. But just because he has left the building and seriously shaken up the Tories, it doesn’t mean that Carswell’s defection is helpful to the eurosceptic cause.

On the other hand, I expect Nigel Farage to have an extra pint today...

Wednesday, 27 August 2014


The report is out now we need action and what do we get? Denial!

What do we want? Prosecutions.

Who should be doing this?

Parliamentary Under Secretary of State for Communities and Local Government, and this is Stephen Williams MP.

Is it going to happen? Probably not.

What should happen is Stephen Williams should travel to Rotherham with his usual entourage, sack the lot, have them thrown out of the Town Hall and then they should be arrested, questioned and charged.

Can you see that happening?

Monday, 25 August 2014

Foreign student immigration

Apparently the government includes foreign students arriving from abroad to attend our universities and business schools in their immigration figures. Why?

The Office for National Statistics estimated that net long-term migration to the UK was 212,000 last year. Prime Minister David Cameron has pledged to reduce net migration to less than 100,000 a year by 2015, while Home Secretary Theresa May has spoken about reducing it to tens of thousands.

Students come to the UK to study and then graduate and return home whereas people who were seen as part of the immigration problem often had limited qualifications, do not have a job and put a strain on national resources.

I do not believe they should be included.

Sunday, 24 August 2014

European hot spots

Recently Germany has been in the spot light for underperforming industry & financial figures but it is not the only one. Italy is now going through what has been officially termed a triple dip recession.

This is an interesting theoretical nicety, but in fact what is happening in Italy at the moment goes a lot further than problems faced by a recession dating committee. The real issue that arises in the context of the Euro Area at the moment is a far more specific one. Will the ECB [European Central Bank] do QE [quantative easing]?

Everyone knows that Italy is back in recession following the 0.2% GDP contraction in the second quarter. Not only did this result suggest that Italy was now in a triple dip recession [or a twenty year decline], it also meant that GDP [gross domestic product] was back at the same level it had in 2000, when the country entered the Euro currency union, this is a surprise. The problem is that Italy has an appallingly low trend GDP growth rate [possibly negative at this point] and nothing which has happened since the financial crisis ended suggests it is going to improve radically anytime soon, in fact there are good reasons to think that  growth could  even deteriorate further.

The combination of low inflation and low growth means that it is the evolution of nominal GDP that really matters now. Nominal GDP is non inflation corrected GDP [or GDP at current rather than constant prices]. If inflation remains low or even becomes negative, then nominal GDP will hardly increase and may even continue to contract [as has happened in Japan]. The result is bound to be that the gross government debt to GDP ratio rises above the 135% it hit in March.

One of the arguments frequently advanced about how this dynamic could be turned around would be for Italy to run a “large” primary budget surplus. Now the emphasis here is on large since the country has in fact run a primary surplus [income / expenditure before paying debt interest] since the early 1990s, but that has not stopped the weight of the debt climbing and climbing.

Italy’s debt now looks certain to climb towards 140% of GDP and beyond [maybe hitting that level as early as Q1 2015], meaning someone somewhere in the official sector should be able to recognize that it is not on a sustainable path. The so called AQRs [bank asset quality reviews] are probably not going to generate too many surprises, but what about doing some realistic DSA’s [debt sustainability analyses]?

So EU leaders and the ECB now face a dilemma. Trying to make Italy comply with its EU deficit and debt obligations may well mean that the deficit comes down but in all probability the debt level will go up given the weak nominal GDP effect.

Thursday, 14 August 2014

British politicians

Recently Mirza Dinnay has been flying to Mount Sinjar in a helicopter to help the Yazidis people who are besieged there. Unfortunately their helicopter has crashed killing the pilot and Mirza Dinnay has suffered a broken leg and is now recovering in a Kurdistan hospital. He had reported as many as 40,000 Yazidis people trapped on Mount Sinjar, but last night the Americans reported fewer than 4000 spotted on the mountain after their reconnaissance mission returned. Presumably they have found a way out which is great news.

The UK has been running regular Tornado runs over the area mapping out the location for the purpose of surveillance and presumably passing the information back to aid agencies, so when Evan Davies of the Radio 4 programme Today asked the Secretary of State for International Development minister Justine Greening if she could clarify just how many people were on the mountain to the nearest 10,000 and she refused saying it was a military operation and we don't comment on military operations, I was surprised.

Either she has not been briefed on the situation, which makes her look like an idiot to the world, or she has been briefed and is just refusing to give over the information which is required by the listeners as it is the top human interest story of today.

Why do our politicians always get it wrong?

Wednesday, 13 August 2014

Post Office Telecoms services

Earlier this year I ended the contract with BT for the phone & broadband as it was too expensive. I got "Home Phone" from the Post Office.

On the 24th July I agreed to take on their broadband as an extra application to the account. They sent a mail confirming the arrangement and specifying what had been said over the counter that it would take about a fortnight. They confirmed I would have use of the service on Thursday 7th August.

Another mail arrived saying that the modem had been dispatched and would arrive before the start date. This was true, the modem arrived on Saturday 2nd August. Following the instructions it worked fine. now all I needed was for them to switch on the service on the 7th.

The day arrived and no service was available.

I phoned the usual help number, got through to an support person who was kind enough to point out that it could start at any time between when I phone in and midnight. I said you mean you have no intention of supplying me with broadband until tomorrow and they agreed.

I find the pettiness egregious in the extreme as I have started paying for the service I am not going to receive for one day, does this mean that someone in the Post Office has decided this as a way to increase profits? It’s pathetic…

Tomorrow dawns and guess what? Correct, no broadband service running, I phone in again.

This time I am told that they have made an administration mistake and it will take 48 hours for a guy to press a switch and activate my broadband. You must be joking!

This is the Post Office today and how they treat their customers...

On Sunday 10th August the 48 hours has expired and once again there is no broadband service available.

I duly phone the Post Office again to ask for the service only to be told that the department dealing with my issue [which I should remind you is their issue in accounts & billing] does not work on a Sunday. I point out to the support person that I am speaking with, that broadband is usually considered a 24/7 service and I am surprised that there is no one to answer my query, which they agree and point out that my service has not started yet because of “their” billing issues and is being dealt with by a department that does not work on Sundays. Could I please phone back tomorrow [Monday] to talk to them?

Anyone curious as to how many customers the Post Office has or why they are rarely recommended?

It is Monday morning 11th August and I have just phoned Post Office Telecoms on their support number 0345 600 3210 and received a message "Unfortunately we are experiencing technical difficulties and our engineers are working on the problem, please call back later" and the line goes dead. This is the main support centre for Post Office Telecoms. Am I the only customer they have?

Tuesday 12th August, I get though to the support centre with much apologies for yesterday and their technical difficulties. After going through the usual security checks, they have the pleasure to inform my broadband service has gone live, and consequently they are now charging me for it. Well you could have knocked me down with a feather...

How interesting I say, then how come the router still shows no internet service and my browser says no DSL available?

Unfortunately I now spend the next hour going through their procedures, restart the modem, change the micro switch dongle, are you sure your computer is switched on!! This ends with them conceding there is a problem and an engineer will have to be called, it apparently takes 72 hours to call an engineer, where is he Tibet?

Wednesday 13th at noon, OpenReach engineer arrives, sits down has a cup of tea while I explain the saga, as I am telling him about the previous engineer removing the Infinity plate and replacing it with an ADSL plate he says, "So you used to use Infinity then?", yes I reply, "I am just popping over to the exchange, won't be long" he says. 20 minutes later he returns and says switch on the router and PC. I do this. Hey presto - broadband.

BT left me hooked up to Infinity and the Post Office didn't think or didn't know to make the necessary changes, [wot a bunch of twats…]