Mr Darling and others have been warning about new asset bubbles forming but there don’t seem to have been a lot of clever ideas about how to get around the problem. One way would be to have another go at improving capital gains taxes so, for instance, these could be much more favourable to the small businesses and property owners than to other kinds of investors. To begin with this would only be a signal of the way the government wants to go and there would need to be a long-term commitment to fostering this kind of ‘main street’ business.
However, I’m not sure, with all this money sloshing around in the world’s financial centres, if there is a way of stopping some kind of 2nd correction. This puts investors in a bind. If the markets are going to correct, the logical thing is for every investor to pull back on all fronts – just the step that’s designed to make the problem as bad as it could be. The responsible, public-spirited investor would say ‘well, I always knew the recovery couldn’t be this good so I’ll take some losses on the chin.’ Not very likely, I think.
Some may take comfort from the fact that the stock markets are still lower than they were before the credit crunch. Equities in developed countries are down slightly more than 20 per cent since the beginning of 2008 even after the whopping increases of 2009. Unfortunately, there’s no reason why things should get back to how they were before. The correction might happen after the stock markets have recovered to January 2008’s levels, but it probably won’t wait long enough.
So which investments are going to turn out to be the best ones. Probably those that produce any kind of income that can be counted on, however small, deposit accounts, bonds with good ratings, those shares with better dividends but not gold. Things probably won’t get dire enough for gold’s status as the ultimate safe haven to come into play.
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As I was writing this gloomy outlook I was prompted to have a look at my SIPP online and I noticed that an exchange traded fund I hold was down 30%. This ETF invests in Brazilian stocks and I can’t see why this big drop should occur. It looks as if there really was a collapse in the bid prices on the stock exchange yesterday afternoon but no corresponding problems with the Brazilian stock index or the value of the Real. Strange and scary and presumably some kind of glitch, which will be righted on Monday morning.
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Great news that Lloyds and RBS have been told that their senior staff can’t have cash bonuses. There seems to be a trend developing of the argument that different professions will leave their posts in droves if they don’t get the right pay and incentives. This argument has already been made in respect of MPs and investment bankers and now it’s being applied to barristers who take legal aid cases. This argument seems to fly in the face of the current state of affairs where opportunities to switch careers or employers are thin on the ground.
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At times this week has looked as if it might be a tipping point for politicians’ commitment to fighting in Afghanistan but Labour and the Conservative Party seem to be holding firm.
The NATO allies seem to have reached a stalemate on three fronts, with President Karzai, the Taliban and with one another. It looks as if neither the Prime Minister nor, more importantly, President Obama can announce any significant increase in troops being deployed without some more commitment from other NATO members.
Where this will leave British policy by the next election is unclear.
The only ground where some change seems to be taking effect is state of mind of muslims. Little by little, the terrorists and insurgents seem to be fracturing their own constituency. The potential for holy war drawing on some sympathy from millions of muslims is seeping away. Psychologically and spiritually, it looks as it’s becoming easier to ignore the claims - if not the threats - of the holy warriors, especially in Pakistan. NOt that the 'al Qaeda' era isn't going to leave plenty of mental scars in the lives of many muslims.
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I’ve read one good book since last posting; ‘The Maze of Cadiz’ by Aly Monroe. Set where you’d expect in 1944, it’s about a member of the secret service on his first assignment, looking into the suspicious death of his predecessor. The hero is just a little flat and in a couple of places I struggled understanding the dialogue but the story has a good pace and leads you on.
I had a walk from Hambledon to Chiddingfold in the middle of the week and got caught in a short, sharp downpour towards the end. The walk included a stretch where you can see Blackdown in one direction and Leith Hill in the other (with dark clouds above both).
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Today’s thoughts are not original but I feel them strongly so here goes.
The not so original topic to write about is the Treaty of Lisbon and the post of President of its Council.
But first I’d like to give a brief glimpse of the pages of my never-to-be-written autobiography. Years ago, say about 25 to 30 years ago, I thought the European Union was a great idea. I can’t remember if I voted for it in the referendum but I think I did. Now I’m very disillusioned with the EU. This isn’t utter disillusionment; it’s reversible, but as an institution the EU seems to have lost its way. I don’t warm to eurosceptic politicians and neither do I like the bland reassurances the government issues on the subject. I even blame the Liberal Democrats for not seeming to mind more that the EU is such a mess.
The EU in general still has its uses but the treaty and the debate about the presidency show that none of our politicians, Brown, Sarkozy and Merkel know where to take it. They’ve lost sight of the greatest thing about the EU, that it really is a club for democracies and freedom lovers. How true is it to say that as if it was a fact rather than an aspiration? I still think it’s partly fact but there’s a worm eating away in the core of this apple – an acceptance of the theory that the only way to make the EU effective is to have an oligarchy of leaders and bureaucrats.
About a year ago Jose Manuel Barroso was quoted using the phrase, apropos joining the euro, ‘the people who count in the United Kingdom’ and contrasting them with the bulk of UK voters. This may have been mis-speaking on the part of Sr Barroso but it certainly sums up the impression that the EU’s leaders have given in the course of the treaty negotiations.
The EU leaders seem to be on the look-out for someone who counts as their new President of the Council. It’s not difficult to see why Tony Blair looks like an attractive candidate. He has big-hitter status and he probably would be effective in chairing those meetings. He might not hi-jack the role for self-glorification.
However, all of this is beside the point, he’s still a big-hitter for all the wrong reasons and he’s still unpopular with a larger section of the UK public than just the eurosceptics. Gordon Brown’s decision to black Mr Blair looked like ineptitude similar to the TA cuts or perhaps a vindictive attempt to push along his candidacy but knowing all the while that it’s bound to fail and that his predecessor would be humiliated in the process. In fact, it seems most likely that it’s an effort to leave awkward legacy for David Cameron.
Whatever it is the government doesn’t seem to realise that they are trivialising the EU issue and the leaders of the other major European states seem to be encouraging them. None of them seem to realise that there may well be no more floors above the current one – national democracies rubbing along together. And if there is a higher level of integration, those same national democracies need to find it through democratic means. Every member state should have had a referendum. Until the leaders of the EU come to realise that their trajectory is going to be like a kind of long lasting bungy jump and in the end they’ll end up just where they started – if their lucky.
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Not much else to report this week. I had a local walk, Eashing Bridge to Lombard Street and back earlier in the week. The fine weather seemed to bring out lots of people to enjoy themselves and almost everyone was friendlier.
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I’ve enjoyed the first of Andrew Marr’s History of Modern Britain although the shots of him in black and white seem rather odd. I remember when I was a lot younger, a relative telling me about an election hustings they attended and the candidate (presumably a Liberal) held up two loaves, a free trade loaf and a protection loaf, which was, of course, noticeably smaller. I guess that was the general election of 1906 and the relative would have been an eleven year old. I also enjoyed ‘Defying Gravity’ enough to watch it again. Finally, Evan Davis interviewing Warren Buffett was an excellent programme. It conveyed the combination of Buffett’s likeableness with the clear suggestion that there’s more to his strategy than his principles would lead one to believe.
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Talking of investment gurus, it looks as if the long awaited correction in the markets may be starting. Possibly, I’m not too pessimistic but I wonder if the lack of any revolutionary fire to lend to business and create jobs may be behind investors’ current confidence. Institutions and big private investors are breathing a sigh of relief and hoping that 2006 really will come around again. Meanwhile the rest of are hoping for something humbler.
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Very glad to see the bankers' bonuses getting so much attention.
The banks indicating that they want to pay investment bankers the kind of bonuses that were paid before 2008 makes me wonder if we will find that this is a double dip recession; it looks as if it could be that the bankers know they need to get their reward now because they can see more problems ahead than the rest of us; at least as far as investment banking is concerned.
We've heard quite a lot recently about how it's easier for banks to make big profits at the moment because there aren't so many banks to compete. This suggests that it hasn't needed exactly top notch investing skills on the part of the staff for the banks to rake in good profits and that there should be more competition for bankers jobs and, hence, a good reason for reduced remuneration.
The obvious conclusion to draw from a bonus bonanza would be that there is an investment bankers' network or inner circle. Or maybe the indispensability of the bankers is similar to a person playing a hand in a card game. I that partner has to leave, it would be difficult for someone else to pick up that hand and play their best.
I'm inclined to think that the regulators and the legislators should make a start on insisting that the bonuses are paid in shares that can't be sold for 3 to 5 years. Ordinary staff share schemes work like that. That would at least address the possibility that the investment bankers are planning a mass migration to paradisial bolt holes in the next few months.
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Last Sunday had an excellent article by Andrew Sullivan about why President Obama is such a wilely operator. He's waiting for his opponents to make mistakes and for his range of options to crystallise - as it were.
I've also read a strange police procedural, 'Morituri', by an Algerian with the nom de plume, Yasmina Khadra. Khadra whose work is shot through with pain and bitterness about modern day Algeria, lives in exile in France. It was interesting to read a writer from a muslim country who was so resolutely non-committal or even sceptical about religion.
I've also been reading one of Fred Vargas's novels about Commissaire jean Baptiste Adamsberg, 'This Night's Foul Work'. Very good. Adamsberg works his detective magic by intuitive genius, rather like the fool in King Lear working as a plain clothes policeman.
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We had a pleasant stroll around Witley Common today and saw some great toadstools (fly agric - red and spotty). No time so far this week for a longer walk as the gardening is crying out for attention. Partly, this is reaping the consequences of putting things off when it was warmer but maybe there are just too many plants making for more work in the trimming and cutting back season.
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Despite the relative busy-ness on the work front, I've fitted in a walk (in fact it may be two walks - can't remember if the first one was covered in the previous post). The first one was a walk from home because I was temporarily without a car. This made it a mainly familiar walk although I did manage to lose myself on the local common - it can only be the size of a couple of football pitches but it's densely wooded. The adjacent common was the location of a giant Canadian army camp during World War One but there seems to be nothing to mark that fact.
The more recent walk was from Grayswood up towards the Devil's Dyke and must be the most gradual ascent possible. By the finish, you're about 850 feet up and have great views to the South Downs. It was a lovely sunny afternoon. The way back wasn't as satisfactory; it goes through Forestry Commission land and the (permissive) footpath is a quagmire. Presumably the commission don't often have to use their footpath themselves.
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I don't have a take on current politics; just a few random thoughts:
I've just been reading an interview with Adam Posen, member of the Monetary Policy Committee, where he says that more quantitative easing may be necessary and that British banks may need to be broken up. He also seems worried that the toxic asset problems of RBS and Lloyds won't be fixed before the QE programme has to be reversed. This seems puzzling in view of the fact that we've been hearing so much about the government's plan to insure these assets. Anyway, it looks as if there's some kind of accounting crunch heading the way of the part-state-owned banks.
The paper(Sunday Times) is very concerned about bankers' pay and rightly so. It seems obvious that these big bonuses are not going to continue. Investment bankers may not be no better than gamblers but, equally, quite a lot of them have achieved through taking gambles in the recent past and that game is more or less over. Their bluff needs to be called; there can't truly be a true job's market where some people's skills are worth so much more than others'.
I've been working on an article about bond exchange traded funds recently and hence weighing up what the media has to say about the direction of interest rates. Bond prices denominated in Sterling seem to have priced in more inflation expectations than, say, those denominated in the euro. This seems realistic but possibly slightly overdone. After all, if the government tries to spend too much money, or borrow too much or do anything else that the global financial community doesn't like the look of, there'll be a run on the pound. The UK has until when the rest of the world feels that fears of a depression are safely in the past and then financial constraints are going to be a lot tighter. This will probably happen just about the time of next year's general election.
Speaking of which, the Scottish Nationalists look as if they are going to make a miscalculation about the amount of leverage they can have in a hung Parliament. The other parties, even ones that might sell the Union down the river, are going to be too worried about a budget crisis and or a currency crisis to be leant on by the Nationalists for extra funding for Scotland.
I liked Harriet Harman's comparison of the allowances repayments, being demanded of MPs by Sir Thomas Legge, to a tax miscalculation; the error isn't necessarily a crime but, if it comes to light, it will always have to be repaid. In a sense, this imposition by Sir Thomas is a taste of their own medicine; a couple of years ago, the Labour MPs were perfectly happy to inflict the flat rate capital gains tax on the country - a notion with massive retrospective effects on thousands of people.
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Need to stop this ramble now but hope to be back sooner than usual.
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The Irish re-referendum put the European Union in mind. Where do you begin with Europe? Not with the ratification of the Lisbon treaty, I'm tempted to say.
The important matters facing the Europeans are, firstly, the unlikelihood of the EU member states being able to agree on a coordinated policy to ensure the continent's energy security. Secondly, mainland Europe's unpreparedness for defending itself against terrorists or other security threats. To be more precise, the situation in Afghanistan seems to be an indication that the case for putting any but a token number of armed forces in harms way is unwinnable.
Europe has enjoyed a very successful sixty five years. There's been economic miracles, a period of unparalleled plenty for much of the continent together with liberty, democracy and welfare. Twenty years ago there was a massive boost to this success story with the collapse of the Soviet empire and the crumbling of the iron curtain together with a repeat of the whole enriching process in the eastern half of the continent.
However, there's a darker story alongside all the successes with a massive reduction in Europe's relative size (in terms of population) and its economic importance. The scope for Europe finding itself imposed upon has been increasing stealthily. With the US guaranteeing Europe's security, the continent has become used to safety at a fraction of its true cost in terms of treasure or collective will. If they could, the leaders of the EU would probably opt for securing the continent with a few dynastic marriages like the Hapsburgs.
When it comes to the Lisbon treaty, it's not so much that it making Europe's leaders less accountable - though it does seem to be doing that, too. It's more that when it comes to foreign policy it seems to be aiming for a point between two stools. The new post of High Representative of the Union for Foreign Affairs and Security Policy looks like a fine way of saving anyone having to really take responsibility for security. This isn't surprising because ever since 1957 the EU has been able to lean heavily on outsiders for defence. It was just this focus on security that the Irish objected to so much in their first referendum.
Without an almost unimaginable degree of unanimity in terms of practical defence measures, there's no point in having a common security policy. A common EU approach to security is only going to work if we're about to enjoy some years of unprecedented peacefulness to make it easy (or possibly a threat so dire that everyone was shaken out of complacency).
The UK for one is a long way from seeing security issues so plainly. Neither the Conservatives nor the Liberals - but for different reasons - seem happy to mention the EU in the same breath as defence. And this failure to engage with security issues looks like a continent-wide phenomenon. Although, there are some sound arguments for scaling down the involvement in Afghanistan, you can't help wondering if a lot of European politicians are not only lukewarm about NATO involvement but embarrased because it's demonstrates all too clearly how little political will there is for a campaign anywhere or any time.
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There was an interesting editorial piece by Andrew Sullivan in yesterday's Sunday Times, recommending inaction on President Obama's part for a while longer because it's so difficult to see which way the wind is blowing in Afghanistan and Pakistan.
Although the United States has tended to approach campaigns in Iraq and Afghanistan, as justified sorting out, straightening what's become crooked, there is another side to America. As a revolutionary nation themselves, they're also pre-disposed to be demoralised by successful insurgency.
It's probably been said already (and put better) but it looks as if Afghanistan is one of the last examples of something. The country may be a mess and the people hopeless and despairing because of all the cruelty visited on them but is nation building what they really wanted? Isn't there some kind of looser polity that could be made to work?
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No walks this week except a visit to Winkworth Arboretum to look at the autumn colours. It's a peak effort time in my garden making sure that things don't become so big and high that I need outside help to keep it under control. Today, we're having the first real rain for a long time. There are pigeon feathers on the grass but I saw the pigeon get away from the ginger cat that pounced on it out of nowhere.
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I've been reading 'The Other Side Of You' by Salley Vickers; very thought provoking.
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We stopped off on the Welsh border for a couple of nights on the way home. The Black Mounains around Hay on Wye were a favourite destination of mine for walking back in the 80s - great scenery and fairly accessble if you don't have a car. On Sunday, the views were better than I remembered.
Talking of cars, I think I may have been sitting in mine for too long as I arrived home on Monday with a pulled muscle. This has made sitting up to use the PC uncomfortable so further delay in posting.
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Before going away I took a couple of good walks. The latest was a circuit covering Puttenham Common and Puttenham village, including stopping off for a beer at the Good Intent (inn sign, a Roundhead soldier praying). prior to that I had a great walk starting at Thursley and then crossing a corner of Thursley Common, crossing over into Hankley Common and walking along its eastern edge. The hill in the common's SE corner goes up to 135m and gives a good view up to the Devil's Punchbowl. The common is used by the Army but there didn't seem to be any firing that day - just a helicopter overhead.
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Now that the main parties have all said that there are going to have to be government spending cuts, the tenor of the pre-election debate seems to have changed markedly. Although this seems like welcome frankness, there is always the danger that the winners of the next general election could start cutting too soon (as Anatole Kaletsky pointed out a few weeks ago).
I guess that frankness about cuts in spending could mean that they threaten recovery more - rather like the nurse telling the nervous patient that the hyperdermic will be excrutiatingly painful. However, if there's too little talk about cuts, holders of sterling will start ditching it rapidly.
There's also the possibility of a backlash against cuts like the Winter of Discontent back in 1979. I don't suppose that any of the parties believe that is their worst danger but some form of coalition after the election would be able to face down union unrest more easily.
The problem for the public sector is that although it's a massive interest group, it doesn't have compelling champions. So 12 years of New Labour is beginning to look like a breathing space for advocates of big government rather than a true revival. The idea that clever people can engineer balance and harmony in society looks less convincing than ever. You don't have to go as far as Lady Thatcher and abolish society altogether to suspect that most societies most of the time are seriously flawed. If there are good apolgists for a more hopeful view of social and economic planning, they don't seem to be getting a hearing.
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I watched BBC2's excellent 'Wounded', a programme about the recovery and rehab of two soldiers who suffered horrific injuries in Afghanistan. I would really like to have known how they came to give permission for the film to be made. On the whole, it was excellent and very moving and, of course, raises all sorts of questions about whether the sacrifice is worthwhile.
As of now it looks as if those in favour of continuing the campaign in Afghanistan are losing the debate. And if you look to some members of NATO, it looks as if it's already lost.
And yet, it's almost as if there were too many reasons for staying but none of them are sufficient on their own. Personally, I would say that the destabilising effect of NATO failure on Pakistan and the fact that the Afghans have been pushed around for too long are the strongest arguments for remaining while the war on drugs is less convincing. The war on terror seems unquantifiable in as much as although the threat is real, the importance of Afghanistan to the terrorists - as opposed to nearby parts of Pakistan - seems less certain. As for President Karzai, his government seems to make more sense to the allies than the Afghans themselves.
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I've enjoyed reading Barbara Nadel's 'River of the Dead', mainly set in the far South East of Turkey. This is the best of the Inspector ikmen stories that I've read so far. There's a lot about islamic- christian - ancient pagan syncretism in that part of the world which was interesting to read about.
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The editing process swings between highly enjoyable and very frustrating. The offering for the investing website is somewhere in between. One particular challenge is having to think up the subjects to write about. Despite quite a lot of writing experience in the last two years, I'm more used to working on subject matter decided by someone else. Thinking of my own subjects is more challenging than I allowed for and all too easy to decide on a subject that works out more difficult than one's expecting.
The long and the short of it is that all the work seems to blotting up the inspiration for ordinary blogging. I'm not really sure how this happens because the focus of the work is relatively narrow. Somehow, it must be using up brain capacity.
So, if I say that, as far as current affairs are concerned, everything seems to be in a state of suspended animation, this may be the state of my brain cells rather than political reality. Or maybe the government really is treading water until (next year's) general election. At least the Prime Minister is prepared to admit now that there will have to be cuts in government spending. Well done, Alistair Darling, and thank goodness you faced down Ed Balls's attempted job snatch. I'm still doubtful that any of the political parties on their own will be prepared to take the tough decisions needed to sort out the nation's finances.
The most worrying aspect of that danger is that the UK ends up unable (or just unwilling) to pay for key parts of our own national security. The arguments over equipping the armed forces could become a lot more serious.
Whether Afghanistan is a key component of security still seems open to question. The government says that it is but they don't really say enough to give weight to their case. Is this to allow for a change of heart or just a realisation that sound argument will be drowned out by people's feelings about the casualties, or because the case really isn't so strong?
The Afghan election has been another instance of half-hearted debate about the fighting. There's been a lot of debate about the low turnout in Helmand invalidating the whole Panther's Claw operation and even the British Army's presence there. But there's a lot of good that could be done for the locals in Helmand before they get around to voting. The Taliban are denying the inhabitants of Helmand many, more basic freedoms than that.
So the politicians and the UK voters owe it to the troops and the Afghans to have a proper debate about what's happening this winter. Further down the road another debate across a broader arena is needed about being tied into a supranational political institution, the EU, that has no ability or will to protect Europeans' interests with military force.
I listened to most of the repeat of the radio drama about the Lockerbie trial in the Hague. As far as I can work out, a lot of the case hangs on the identification of the clothing in the bomb suitcase by the owner of the shop in Malta where the garments were purchased. It also seems possible that some lines of enquiry were pursued with more diligence than others.
I've always thought that it seems wrong that other prisoners don't get released early because they keep on insisting their innocence but al Megrahi case has made me think again.
In any case, al Megrahi's release was on compassionate grounds, as we keep being told. Granted, if you deny someone their last few weeks with friends and family close by, it's an opportunity gone forever - just like executing a person who turns out to be innocent. Yet surely, with the opportunity to 'say goodbye' denied to so many victims, this is compassion that shouldn't have been in any politician's gift. Just possibly, if there were serious concerns the case was unsound, he should have been released within Scotland but not allowed to return to Libya.
So it's Scots law relating to prisoner release that's at fault. However, the Westminster government do seem to have been preparing the ground for letting al Megrahi go home themselves by agreeing to include him in a prisoner exchange scheme with Libya. Presumably, that agreement applied to prisoners in Scotland and might have been put into effect if the Scottish government had decided to try and keep Megrahi.
Also, the release of Ronnie Biggs a few days earlier looks suspiciously like softening the ground preparatory to al Megrahi's release.
In years to come it'll be interesting to see what else comes to light.
After all the focus on the Scottish government in the al Megrahi case (the inluence over foreign policy that the Labour government don't seem to have realised they were giving the devolved government), it was interesting to hear Alex Salmond state his intention to propose a referendum on Scottish independence to the Holyrood Parliament in the next 12 months. Would that be a referendum timed to coincide with the Westminster elections?
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I'v had one good walk in the last couple of weeks. This started at Frensham Great Pond and wound up hill to the west of Churt, crossing over into Hampshire for about half the distance covered. The highlight was Huntingford Bridge (over the River Wey in its early stages) and the much smaller pond a mere hundred yards down from the Great Pond.
I've not done so much reading recently but borrowed a book about the archaelogical search for the real Emmaus by Carsten P Thiede. The most interesting part of this was the case he makes for the references made by Josephus to Jesus in his account of the Jewish War of AD 70 being authentic. Most commentators have discounted these references to Jesus - which refer to the resurrection - saying that Josephus would never have said such things.
We've had a bumper harvest of plums. The tomatoes have been less successful and not particularly tasty - don't think I'll bother next year. The main feature of the garden currently is the row of 13 foot sunflowers looking over the garden from next door - like some floral surveillance.
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The editing process for the latest book has begun and there's a lot of suggestions coming back from the editor for me to weigh up. The book is supposed to be accessible to first time investors which presents a problem. What may be vital information for one reader may be 'old hat' for someone else. the question is how far back to draw the starting line. Presumably the same problem faces all the journalists who write for the personal finance pages of the papers. The solution that they usually deploy - in my opinion - is fudging it by making everything seem simpler and less risky than it really is.
Granted that it's a bee in my bonnet, but I honestly believe that the problem is much more serious than people realise. Not only are levels of financial 'literacy' quite low but there's not even a common level of basic understanding.
One answer might be to make personal finance a component of secondary education. The Personal Finance Education Group have a programme for introducing the subject in secondary schools - and all power to their elbow. Specialist trainers in the subject may be the answer but expecting teachers to deliver financial education doesn't seem realistic. Given that teachers (in the main) are paid a monthly salary and should be enrolled in a fairly satisfactory occupational pension scheme, most of them are in the ranks of the financially secure. They may be part time or supply teachers or have financial pressures entirely separate to their personal income but they have the basics of sensible finances. Would it work to use them as the channel for financial education for people who could well face a working life of much less financial security and real difficulty in saving for their retirement?
In fact - I believe - that the problem of equipping everyone with the wherewithal to navigate the personal finance maze goes deeper than the difficulty of fitting it into the school curriculum. The real problem is that current culture doesn't really permit a lively discussion about how personal finance should work. The UK public accept the welfare state but it's a passive acceptance, something that has been handed down from a generation who will now be no less than eighty years old. It's probably much easier for politicians to talk about eradicating child poverty than to debate reducing inequality, even though the two subjects are really two sides of the same coin. Equality/inequality are off-limits to most politicians. The reasons for this aren't easy to diagnose.
A politician could say that they want to make poverty (or inequality) history but it would be unwise because they're unlikely to succeed. In fact, it's easier for a politician to speak out on world poverty - and all credit to the Prime Minister for his dedication to this - but the electorate are not going to pay as much attention to what actually happens as a result. It's also noteworthy that the moral argument for action on this front has come from outside politics.
It's far more likely that the age old mixture of financial winners and losers is going to continue than that any politician is going to be able to significantly reduce inequality. It's a dilemma for politicians; they can't fix it and neither can they be seen to be condoning it. More than politics is needed to gain some purchase on a problem like inequality. What's needed is some recognition that, for many people, the way in which inequality and absolute poverty flourish has a meaning. In the existing consensus the idea that inequality can have a spiritual or philosophical meaning seems controversial but that's only because society is so determinedly neutral about such matters.
Ironically, without more discussion of the meaning of inequality, there's no way of finding out how much common ground there is on the subject between religious people and materialists and peeople of different religious persuasions. Of course, there may be serious differences but the debate would surely be worth having.
If you travelled back to, say, 1850 there would have been a consensus about personal finance centring on ideas of self help, thrift and charity. This would have been the early Victorians approach to understanding the desirability of personal responsibility alongside the problem that nearly everyone has to 'navigate' through much that's beyond one's own control. In the century before John Wesley said "Make all you can, save all you can, give all you can".
Modern thought doesn't have much to offer on what inequality means but it should; wealth is a moral issue. Although a once and for all solution to inequality seems unlikely, more debate about what it means might throw up enough good ideas and public pressure to fill the politicians' sails so to speak.
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I was thinking about posting on the idea of immigrants speeding up their applications for citizenship by getting involved in party politics but I'll leave that for the time being.
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Apart from work, there's been plenty to do on the vegetable plot. Despite the digging in the spring, the vegetable beds are in danger of being overwhelmed by brambles. I've started digging up the main crop potatoes - can't remember what they're called but they're a lovel pink colour. Not so tasty just boiled (as the salad ones)but beautiful fried or roasted. This week the plums are ripening.
I've had two walks since last posting. Walk one was in and around Grayswood. when you drive through Grayswood looks just like a residential part of Haslemere with a rather nice cricket green but there's an interesting hill in the middle of it with a view to the east. This was a shortish walk but the second was longer. This started near Dunsfold (Hookhouse Road), walking to the village and out again across a couple of fields to the Godalming Road. One of the fields had about thirty young cows in it who came to check me out. I retreated to the style until they lost interest. The other side of the Godalming road the footpath crosses what looks like a park (with a dried up lake)and as the ground rises towards Hascombe Hill you have a great view of the South Downs. Closer to hand there's a stone circle but since this doesn't feature on the map, I guess it's a recreation of a stone circle. Will it be added in the next time the map surveyors come round? After that the walk winds up to the top of Hascombe Hill with lots of fir trees. The hill really was a fort in the first century BC but there doesn't appear to be any information about that. After that the walk went down rather more steeply, back across the Godalming Road and part way up and around Breakneck Hill.
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Recent good books have included 'Child 44' by Tom Rob Smith, about tracking down a Russian serial killer in the year Stalin died, and 'Sacrifice' by S J Bolton, about serial killings on Shetland narrated by a slightly irritating hospital consultant. On a more elevated level, I read ;'The Jesus Papyrus' by C P Thiede and Matthew D'Ancona. This is about redating St Matthew's Gospel and the evidence of a scrap of papyrus found in Egypt in the 1890s but now lodged at Magdalene College, Oxford.
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What a difference a couple of months makes. For the last week the Army's problems in Helmand have been all over the news, triggered by the higher than normal number of casualties and deaths out there. Yet back in May the media and the public seemed to have forgotten about Afghanistan; generally speaking, we were too busy finding out about the ways in which MPs had been playing the Commons' allowances system.
Operation Panther's Claw has been partly responsible for the rise in the number of deaths and some of the population will have maintained their concern for what was happening in Afghanistan in spite of May's juicy political scandal but the fact remains that we're not good at multi-tasking with political stories and, once our attention has been diverted, we don't retain what we've just learned. Political stories have a way of simply dying themselves, as if we depend upon the collective focus to maintain interest or we become slightly shamefaced about forgetting the old stories.
This attention deficit gives politics a curious serial quality as if it was a sequence of court cases. The government are in the dock over something they did or didn't do but in the great majority of cases the jury never reaches a verdict; something else comes up and the government are let off the hook. Sometimes the focus shifts away from the government to greedy bankers or incompetent social workers but it's surprising how often government mistakes trump others' misdeeds. The media were very quick to focus on Lord Myners letting Sir Fred Goodwin get away with his fat pension (AIG directors' remuneration got the Obama administration into hot water in its first weeks in office).
Right now the Prime Minister is the focus of media attention (ie. on trial) for opting to send just 700 more troops to Afghanistan instead of the 2,000 extra the defence chiefs appeared to have wanted. Listening to the PM answer questions from James Arbuthnot on this when he went before the Commons Liaison Committee on Wednesday was deeply unimpressive. It was obvious he was stalling but, more than that, the game of 'I'll answer the question I would have liked you to ask me' had rendered the exercise pointless. It's clear that there's no way to frame the question in such a way as to force a clever minister to spill the beans'.
The Prime Minister came out of the exchange looking decidedly shifty and we can only assume that some combination of parsimony and covering up for past mistakes led to the 700 soldiers decision. The committee appearance served no purpose as the public have drawn their own conclusions and the Prime Minister already had form for appearing shifty.
Two things can be said in the PM's defence. Firstly, and more personally, he talks as if he understands that he's supposed to be accountable. He seems to speak to journalists more and, given the long record that New Labour have now, that's never going to be easy.
The second point relates to the political system rather than this particular Prime Minister's personal style. The fact is with the kind of politics we have the part of national life the Prime Minister is responsible for is all about money. Politicians make the decision they do because they are under financial constraints. (Critics may say that a lot of money is wasted in the public sector but public funds have been seeping away to public servants and government contractors since the time of the pharoahs.) The critical issue is that the election debate there should be about how much money there is and what the government should spend it on is never going to happen. The spending review and the defence review will happen after the general election. The opposition won't challenge the government on this sufficiently forcefully because it suits them not to have spell these thing out to potential voters. They probably couldn't make a serious fuss anyway, because the public aren't sufficiently interested.
This issue of being clear about the sums is the area where revolt is really needed, not the MP's expenses. It's the endless reporting on policies without the sums that makes UK politics so short-term and, ultimately, futile.
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I've been on one good walk in the last fortnight. This was along the western side of Blackdown on Monday last week. I avoided getting soaked by seconds. I knew that it was going to become busier work-wise after that. However, on Thursday we had made a day trip to the Isle of Wight, just visiting old haunts. We were pleased to see the new walkway across the mud at Newtown harbour.
I've read one good book, 'The Last Breath' by Denise Mina, set in Glasgow in the nineties, I think. It was published two years ago but written before MS Windows and mobile phones became universal or the Northern Ireland peace process succeeded. Anyway, it's a good read, more for the human interest than the plot.
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I've also been reading some of the debates about the controversy around Quirinius, Governor of Syria at the beginning of the first century CE (as it seems to be called now). The controversy is that St Luke uses Quirinius's census to date the birth of Christ but the the reign of Herod the Great, the other historical fact that the evangelists use, ended in 4 BCE. Sceptics use this conflict to argue against the infallibility of Scripture while christians have been thinking of arguments to account for the discrepancy for nearly three hundred years.
Of course this raises all sorts of questions about whether Christ's divinity 'depends' upon Scripture or whether Scripture's status as inspired 'depends' upon its recognition of who Christ was.
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On the whole I've enjoyed the latest book and I'm dead keen on the subject matter. I definitely plan to take it further.
I've had two great walks since last posting and a trip to the beach (first sight of the sea since the holiday in Scotland).
Walk No.1 was from near the top of Blackdown to the village of Northchapel and back again via a different route. The only problem with this walk is that the way out includes a steep downhill and the way back an equally steep up. I wouldn't attempt it today because it's too hot but two weeks' ago was just perfect. The way out was a new route for me and the start was confusing. The National Trust have put wild cattle on the top of Blackdown to maintain the heathland habitat etc. etc. This means that there's a fence to stop the cattle walking off the hill. There are also several gates which - I now know - have no relation to public footpaths.
At Northchapel I had a pint of bitter in the Half Moon and read about Noah Mann, landlord, who was a famous early cricketer and famously tall. Apparently, he died young from carousing in his own inn and then falling into the embers on the hearth in the small hours.
The way back linked up with a previous walk from Lurgashall.
walk No. 2 This started from a lane just past the Lickfold Inn and went up to the top of Bexley Hill (close to the TV mast). Most of this walk was along the north (scarp) face of the hill and a lot of it was under the trees. According to the map it's all woodland up there but there's an extensive open area. This walk's refreshment was taken at the Duke of Cumberland at Henley. I chose Staropramen because it was a hotter day and took it outside to the pub's enormous garden.
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We've been digging up our crop of salad potatoes - very tasty - and yesterday I was picking the beginning of the blackcurrants (maybe beginning and middle would be more accurate).
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I've read a couple of good books lately. Firstly, Alan Furst's 'The Spies of Warsaw', which is another in his series of convincing espionage stories set in the late thirties. However, there was one anachronism; he refers to embassy staff in Singapore but surely Singapore was a colony at that time and would only have had consular staff.
The second good read was Stephen L Carter's 'Palace Council' which is a thriller woven around a group of influential mainly black Americans from the fifties to the seventies. This excellent, educative if you want to learn some American modern history but somewhat long.
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I don't have a lot to say about the political situation except that I hope that David Cameron and the political correspondents are able to pin the government down about its spending plans. The next election has got to be all about spending cuts and tax increases and complete openess about government finances.
It seems as if the Prime Minister sees vision as synonymous with spending to bring about change; but doesn't allow much room for everyone's native wit helping to bring things around.
Personally, the future looks more like an age of people being well versed in all sorts of interesting subjects and ideas, lots of creativity and rather less consumerism.
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With the government looking seriously at proportional representation, I wondered briefly if my expectation (or desire) for a coaltition might come to pass. Gordon Brown would slip in a referendum about PR before Parliament is dissolved. He goes to the country with the message that he (and Alistair Darling) saved the country from a financial melt down. Naturally, the Labour Party don't come anywhere near an overall majority but they manage to convince the Liberal Democrats or the SNP that the Conservatives are ready to withdraw from the EU and scrap the NHS and, hey presto, we've a coalition government.
The only flaw with this scenario (in terms of likelihood) is that the media doesn't believe that there would be enough time to bat around the ideas about PR systems before the general election HAS to be called.
Actually, a coalition that leaves out Labour or the Conservatives is highly undesirable. It needs to be Labour AND the Conservatives to have enough nerve (and moral authority) to restore the country's finances.
Even allowing for the media's appetite for novelty, it's surprising how quickly the news has moved away from the reform of the MPs expenses and how quickly the parties can try to return to the normal business of throwing misleading slogans (about government cuts).
Another idea that seems, as a deliberate attempt to distract everyone, to have been thrown up for the media and the public to chase after is MP recall. It seems like a device that's designed to thwart the electorate. How would it work? If you happened to vote for the sitting MP and support his/her party, a recall would mean that either your preferred party is bound to lose (because its candidate is soiled goods) or the party of the sitting MP would sack him or her and put up another candidate - which doesn't seem very just. And what would happen if a PR system was in place; would all the MPs who had been elected in that constituency's previous election have to stand again?
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I took the time to read President Obama's Cairo speech and was duly impressed. Of course, it doesn't, of itself, change anything, although it was neat to have it on the same day as an election in Lebanon. Just how little difference it made has been demonstrated by President Ahmedinajed's post election clamp down. Although, it could be argued that progressive's in Iran were bolstered by President Obama's calls for a thaw in relations and that this made it more likely that Iranian conservatives would need to 'affect' the results of their own election.
The situation is highly problematic. Ahmadinajed (without the legitimacy of a properly conducted election to validate his position) will probably become more aggressive and keener to have nuclear weapons up and running. America and others condemning abuse of power in Iran will simply be confirming Ahmadinajed in all of his prejudices.
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Since last posting, we've had one visit to a garden (lake and rhodedendrons) and I've had one good walk. This started on a new path (to me) on the outskirts of Chiddingfold. The middle section was in Tugley Wood and Pear Tree Piece and the last section in Prestwick Copse and along Vann Lane. There's a large chunk of to the west of the A283 and down to the county boundary with hardly any rights of way so, what with the main road, walks to the south of Chiddingfold can't be made to join up with ones to west of the village.
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The holiday was a return visit to the beautiful island of Coll in the Hebrides (previously visited and posted about almost exactly two years ago). We stayed in the same house next to the airfield. The airfield is now in use with scheduled flights twice a week and a few private planes landing and taking off while we were there - which we could watch from outside the kitchen door. We had plenty of sunny weather but rather windy with it. The main activity was visits to the superb beaches and we had opportunities to watch seals, basking sharks and an otter do their thing.
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The last time I posted I was expecting the Prime Minister's Youtube appearance to sort the allowances scandal (as it's since become). I can remember being more surprised at his choice of medium than shocked at the MPs' claims on expenses. Presumably, Gordon Brown was hoping to head off the public relations disaster that has overtaken Parliament and his government. And maybe David Cameron wouldn't play ball because he had a clearer strategy worked out for when the news broke.
Years ago I can remember someone pointing out that ninety per cent of morality was lack of opportunity; you can imagine the snigger that that remark produced in an audience. My first reaction was to think it was unduly cynical (the ninety figure is just pulled out of the ether, of course) but then you have to concede that the remark has more than a grain of truth in it.
A big part of the fix that the MPs find themselves in is that, collectively, they are responsible for failing to shut down the opportunity (that the current allowances regime allows them). As Martin Luther said, you can't stop birds flying overhead but you can stop them nesting in your hair.
That said, now we've all had an opportunity to digest the news about the MPs' claims, which were genuinely surprising, it seems that there is too much readiness to cast stones and there's a danger of a destructive mood being unleashed.
In my view the government has made the wrong call in planning to take away MPs' full responsibilityf for the future expenses regime. The MPs should be responsible for the kind of expenses system, the administration of the system and (on an individual basis) their own right use of the system and freedom of information should ensure that they fulfil all these responsibilities satisfactorily.
Overall, the government seems to have lost it since the scandal broke. There never has been a time when the government had so little to say for itself, not even in the last few months of the Major government. Then the mood that it was time for a change was well and truly harnessed by New Labour, but this time around it seems as if it's the British Constitution that's on sufferance.
The news that Nick Clegg was calling for the resignation of Alistair Darling gets close to the heart of Mr Brown's dilemma. The Chancellor of the Exchequer has coped well with the credit crunch on the whole and coping with the economic crisis is the only thing that the government has going for it at the moment. Without him, the government will probably crumble.
Apart from more revelations about how the allowances data was leaked and better insights into how the Fees Office went about its business the scandal itself has little more potential to affect the direction of change - the stones are as it were already rolling down the mountainside. It's what we already know that will decide how many 'heads will roll' and how soon a general election will be called. However, it's difficult to join up the expenses scandal with all the constitutional reforms that have been given an airing. How do the expenses relate to the abolition of the House of Lords or proportional representation? Nor does it seem like a good idea to have a referendum on something like PR at the same time as a general election; surely people need to know the voting system well before they use it.
Like most people it seems, my hope is for an autumn election.
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How come political and financial commentators have been so shocked by the 50 pence in the pound higher rate of income tax? Why do the same commentators keep on comparing it to the marginal rates of income tax that prevailed in the nineteen seventies? I remember reading an article by an elderly lady who grown up in an aristocratic household in the years before World War One (it may have been her take on the world of 'Upstairs, Downstairs' as it really was). One of her reminiscences was Papa's foul temper the day Lloyd George announced his 'People's Budget' and raised super tax to two shillings in the pound. Like Lloyd George's two shillings, Alistair Darling's 50 pence will be the thin end of the wedge and surely the commentators must have realised that more is to come. There's going to be more taxes AND spending cuts. The only alternative is runaway inflation. That's what the next government will need a mandate for and that's why the massive loss of authority on the part of the politicians is so dangerous.
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While away I spent more than the usual amount of time reading. This included George Soros's 'The Crash of 2008 '. This is both a highly interesting book and highly irritating one. The reason is that Soros has added four chapters since the Lehman Brothers stage of the crisis unfolded last autumn. He would have done better to have recast the book more radically when the extra material was added in.
That said, the main idea - that neither economists nor financiers can be objective about finance because what they say has an effect on what they're talking about - is full of possibilities and Soros is a thought provoking writer.
I'm still reading 'Rome & Jerusalem' by Martin Goodman, which as a study of the lead up to the Jewish revolt of AD 70. This is highly interesting but historians of ancient Rome have a lot of material to work on and this can make Roman history seem somewhat dense.
Finally, I enjoyed 'A blood Dimmed Tide' by Rennie Airth. Pre-war England seemed slightly over-idyllic but I'll certainly look out for the other stories in the series.
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Finally, how come the minor scandal over George Osborne and Lord Mandelson meeting Oleg Deripaska on his yacht or at his Corfu villa hasn't been gone over again now that he's involved in acquiring a share in Opel - Vauxhall?
Next time I post we'll probably be past the European elections but one good reason for treating the EU seriously is that it seems to be the only way to prevent the Russians from playing us off against each other.
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I've had a couple of walks but in public access woodland (rather than commons). The first was a walk in a bluebell wood. This is an almost annual 'pilgrimage' for us because the place is so stunning. Last year we didn't make it because we were still getting back to normal after our Australia trip and days off and fine weather didn't coincide around the right time. To see bluebells it needs to be sunny and in the morning. This year the wood didn't let us down. I'll (try to) put up a photo to give you some idea.
That was a short wander, then on Thursday I went for a proper walk around Hambledon and saw a whole lot more bluebells. The route was the top leg of Vann Lane (nice and quiet that day), Prest Wood, Packford Farm, Lord's Copse (bluebells) and Hambledon Hurst. I saw and heard some hawks a couple of times; to high up to be sure but I think they may have been buzzards. There was a crow flying around - protecting its young maybe.
I had thought of making a detour for a drink at the Winterton Arms at Chiddingfold but I contented myself with a choc ice from Hambledon village shop instead.
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Gordon Brwon's announcemetn of radical changes to the allowances of MPs on Youtube has to be the greatest humiliation of the House of Commons for a long, long time.
Parliament and especially the Commons finds itself at the heart of a crisis. Instead of being the country's chief agency for improvement, for making things right, the Commons has become, if not 'the Problem', certainly one of the problems. And, ideally, trying to put it right ought to be one of the main debates of the 2010 genereal election - and the one after that, too, possibly.
The real answer to the question of what's wrong with Parliament doesn't relate to MPs' allowances in the main; it's that we're in danger of losing sight of how a representative democracy should work in the internet age. There's too much information zapping around for a single, non-internet institution like the Commons to keep up with. The YouTube announcement was a sign of the times. MPs have risen to the challenge by starting their own blogs and websites and no doubt political parties are busy trying to capture (record, interpret and mould) internet opinion but neither the parties nor the individual MPs have woken up to the need for a completely new model.
It's been recognised that issue politics have grown in importance in the last half a century. Although this has been at the expense of party programmes, there's been little debate about what this signifies for the British constitution.
In theroy it might be possible to replace MPS with some form of pure democracy taking advantage of the internet. the public may not dislike the MPs so much that they want to sweep them away entirely but full democracy over the internet is becoming a benchmarek that the Commons has to beat if representative democracy is going to stay in good health.
It's not easy to find hard evidence of the course of the Commons' decline but it is easy to sense it. The kind of grandstanding that you hear in Commons committees, some of it bullying and ugly, suggests men who are grasping for publicity and relevance - and they don't always seem on top of their brief either. In the Commons there are some great orators - Cameron and Hague come to mind first - but you don't hear 'catching' ideas very often. Quite a few MPs get broadcast coverage to comment on what their colleagues are up to and these ones often seem intelligent, personable and 'insightful', but talking on the radio or TV isn't their day job - it's time out as a media type.
Where MPs emoluments come into the picture is not just that exploiting the current system is very provoking for the rest of us. The way in which MPs are rewarded seems designed to disqualify them from important parts of their job. (You suspect that) their pensions make it difficult for them to understand the scale of the problem for ordinary people, owning two homes gives them a particular interest in the housing market and not many of them have the opportunity to understand public transport from the point of view of someone commuting for, say, three and half hours a day.
It's the lack of ideas in the Commons that is becoming the House's most serious weakness.
If pure democracy seems extreme, what presentative kind can the internet promote and what are the parties able to do to help or hinder that?
Part of the Commons' identity crisis has already begun to be worked out by proxy in the debate over the reform of the House of Lords, though, tellingly, the debate (and the reform) seems to have become stuck. Assuming that the House of Lords has to be elected, it seems obvious that only one house can be elected on the basis of a territorial franchise. At first glance it seems equally obvious that the Commons should be the chamber that represents the 'places' - as it has always been. But if the Commons is supposed to remain the real seat of power, does that still make sense? It mightbe time for a more dynamic system where (stage 1)the electorate chose the issues - and they wouldn't have to be the same issues each time; (stage 2)the candidates had to demonstrate they were a) competent to decide on the issues b) representing/leading substantial amounts of public opinion on the issues.
Maybe not but, as I said, more of a debate is needed.
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I'v been reading Niall Williams's 'Boy in the World' and greatly enjoyed it.
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The good effect of the G20 summit seems to have lasted, the stock markets haven't taken fright again (yet) and there are hopeful signs (five consecutive months of people's interest in house-buying increasing). Of course, the unwelcome consequences of the demonstrations are also rumbling on with the mobile phone film 'footage' of the police attacking the demonstrators and the public.
It's becoming clear that (relatively) new technology has more of a effect in undermining established powere structures than physical demonstrations. It's as if the establishment has become hell-bent on self-destruction by indiscretion - indiscrete e-mails, indiscrete expenses claims and indiscreet behaviour in front of the camera. The individual are having devastating effects but in reality the scope of the damage is much greater than those - more like a slow motion revolution. Powerful institutions and corporations are losing their 'cloaking' ability. It's a if great stone buildings have become steel and glass all of a sudden so that the public are able to look inside and see what's going on exactly.
On the whole this seems like a good thing. It could be destructive in a wasteful sense but on balance it looks as if it's going to empower ordinary outsiders. Authority's response is likely to incline to clamping down on internet freedom and freedom of information. In the immediate future the most potent reaction will probably relate to the importance of big corporations, public and private, as employers of thousands. One manifestation of their fight back seems to be rigid discipline within the ranks and harsh measures for any who step out of line. It'll be interesting to see if the institutions turn on one another or whether they close ranks.
Another interesting question hangs over the Prime Minister's attitude towards these institutions. He's seemed like someone who never questioned the way these big institutions were run.
The future of the big corporations is clouded because some of the social forces at work are having a slightly different effect. Damien McBride, for example, has been exposed by e-mails trickling through to where they were never meant to go. But he couldn't be said to be engaged in typical corporate behaviour and nor does his political adviser role fit into any of the normal corporate castes. It looks as if some of the staff at No. 10 have been allowed until now to behave as if they worked for some sort of weird PR outfit, and it seems clear that the Prime Minister had to take some responsibility for that - as he now has.
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I've been struggling to find anything good to read lately, especially in the fiction department. I started Elmore Leonard's 'Up in Honey's Room' but although the dialogue was superb, i couldn't be bothered to wait to find out what happens. Instead I've fallen back on John Masters's 'The Deceivers', one of his Savage sequence of Indian historical novels. This one's set in the 1820s and has some interesting ideas about setting aside due process by going 'under cover' in order for a deeper justice to prevail.
I've also been reading 'Nudge' by Richard Thaler and Cass Sunstein. This has a great idea - nudging people to use freedom to behave wisely - but nearly all the examples are American ones. I couldn't be bothered to transpose them into a UK context, so that's going back to the library unfinished, too.
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Finally, it was my birthday on Tuesday. We went to the theatre at Chichester to see 'Hay Fever'. Very enjoyable.
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Some kind of watershed in the recession seems to have been reached; a point when matters could move in one of several directions.Saturday's demonstration in central London captured the mood of the moment with the calls for help for those affected by the recession AND to combat global poverty AND for progress in combatting climate change. There were uglier tendencies, too, such as the calls for bankers to be burned or hung from lamp posts and the support for the window smashing at Sir Fred Goodwin's home in Edinburgh.
Politicians seem to be at their own cross roads with the talk of division between the fiscal stimulus camp and its opponents and the talk of the G20 summit being a 'damp squib'.
Presumably, we'll have to wait until Gordon Brown and Mervyn King are both out of office (and some) to find out everything that's been going on behind the scenes between the two of them. The media's coverage of the Governor of the Bank of England's 'No' (to fiscal stimulus) has left a lot of unanswered questions. Amazingly, the media seem to have made too little of the extraordinary timing of the Governor's remarks and of the possibility that the Chancellor and he may have ganged up on the Prime Minister.
while the 'ganging up' seems undeniable, there is always the possibility that Mervyn King waited until the Prime Minister was out of the country because they both knew that, while ruling out a further fiscal stimulus would be humiliating for Gordon Brown, they also knew that public expectations had to be trimmed. Once he was out of the country, at least the Prime Minister was able to get away without having to answer the Governor's case in full. Whatever, the facts about the timing, the Prime Minister must have known before last week that further fiscal stimulus ran the danger of provoking a Sterling crisis.
So what has been Mr Brown's plan? In part he seems to have been workig to weaken the effect of European opposition to fiscal stimulus. Since the French and the Germans didn't want to pay for more stimulus and much of Europe, the UK included, couldn't afford one anyway, maybe Gordon Brown was just trying to make it old hat and to prevent the Europeans from trying to make the matter more contentious than it needs to be. The end result of Europe getting bolshie about stimuli would be to make it easier for the US to become more protectionist - and there's enough danger of that.
If Gordon Brown can achieve a repeat commitment to combat protectionism together with a restructuring of the IMF along with more funding for the same to help developing countries, he'll have beaten the 'benchmark' 1933 London conference. he can't really claim the credit for it but some signs of trust on the part of China that the US won't try to inflate its way out of its huge deficit would also help.
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Gordon Brown has been leading the country on a wing and a prayer for a long time now. He's benefited enormouslyform haing 'steady' Alistair Darling as Chancellor and for the scandals affecting Jackie Smith, Tony McNulty and Lord Myners and now from the Conservative Party's divisions over Inheritance Tax and the EU. In view of the immense loss of wealth across the country as result of plummeting house prices and shrinking share portfolios, it seems odd that the Conservative should be worried that the threshold for IT isn't rising.
Lord Myner's political career has become a kind of bell wether of the changing climate. Only a year or 18 months ago his businesses with offshore holdings might have drawn some criticism but the media would have thought they were unexceptionable. I'm still inclined to think that he's one of the good guys and to cut him some slack over the Fred Goodwin pension on account of his being new to his ministerial post and having a lot on his plate at the time. He's done good work on improving the UK's financial system when he was in business and he should have a lot to offer. It's intriguing that other politicians seem to believe automatically that Sir Tom McKillop's version of events surrounding the Goodwin pension must be the correct one. Although I don't actually read the Guardian (of which Lord Myners was the boss), it seems unlikely that any of the rest of the UK's media are completely spotless when it comes to offshore funds, non-dom status etc.
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I've had no time for any long walks since last posting but have made progress on the new veg patch. found some frog spawn in the watering can the other day. I checked on the Internet about what to do with it and found a helpful thread on Mumsnet on just this topic. So yesterday, we took the watering can round to the nearest pond. When I came to carry the can, I realised that the frog was still in there with the spawn so she's been moved to the pond, too.
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We borrowed the dvd of 'The Counterfeiters' on Saturday. It's all about an ace counterfeiter, Sal Sorowitsch, imprisoned in Sachsenhausen concentration camp and made to fake pound and dollar notes. Not bad but it was a little frustrating plotting the moral dilemma of Jews assisting the Nazi war effort when the main character (a long term 'professional' counterfeiter)plays his cards so close to his chest. Also, a scene of Bank of England officials wondering where all the money is coming from would have been good.
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Having said that we're at a watershed, in just the last two days the signs have been good. UK consumer confidence rose slightly in February, apparently, there are signs that the housing market has passed its lowest point and the stock market has improved. In fact, until this week, investors seem to have been stuck in a swamp high up the mountain with huge amounts of cash surging in and out of UK bank shares almost every day.
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The media's predictable conclusion about the apology was that it was designed to embarrass Gordon Brown. The commentators couldn't say this outright because they don't know it to be true - but the implication was pretty clear. Curiously, the commentators seem to have concluded that the Prime Minister will be embarrassed, but David Cameron doesn't seem to be running any risk of being accused of opportunism for his apology.
Benjamin Disraeli is quoted as saying that those in public life shoud 'never complain, never explain'. I thought this was a helpful principle for school life when I first heard it. In a way, David Cameron has flouted that principle but Gordon Brown has continued to abide by it. I'm not sure why Disraeli worked with his 'never explain' rule but one reason might have been that, in the tumult of events, you can never truly explain; likewise, it's difficult to know what an apology truly means. Full scale admissions of culpability - 'resigning matters' in politics - are one thing but more generalised apologies for 'messing up' don't necessarily help. For example, if a political party makes mistakes (as it assuredly will), presumably a primary cause of these arises from their desire to please the voters.
This leads on to interesting ground as far as the Conservative Party's first decade in opposition is concerned. Because the New Labout project ahd stolen the Conservatives clothes and were making themselves out to be the natural party of businessmen, the Conservative Party were in quandary - if they had stayed to true to their constitutional role, they would have questioned the wisdom of Labour's fiscal, financial and spending policies more and in so doing might have moved to the left of the government - sometimes. This might have seemed absurd but the alternative certainly didn't work out as a power gambit.
The real problem with apologies is that they don't really help to get to the bottom of the matter. The Conservatives can apologise for not being a very effective opposition and everyone can hope that they might try to do better. But, if the government were to apologise, they would need to tell us precisely which policies were the wrong ones. If they can't tell exactly what went wrong, the apology is certain to have one result; it'll set us all facing in another wrong direction. For instance, the government could apologise for bribing us with so much of our own money to keep us sweet after the invasion of Iraq but in fact now wouldn't be the best time to reverse that policy.
So David Cameron's apology looks fine as far as the Opposition's THINKING goes but I'm not at all sure that it's an example for the Prime Minister to follow. Now isn't the best time to start trumpeting the virtues of thrift. Alistair Dalring and Mervyn King would probably say that it would have been a good idea earlier in the decade but not for just now.
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Thrift is going to come up in the context of the G20 preparations, too. The US wants Europeans to spend more money to try to restart the global economy. the problem with that is that some countries can't afford to pump more money into their economies because investors are becoming leary of buying thie sovereign debt. Italy, Ireland, Greece and Austria seem to be in this bracket already. The UK Treasury is presumably concerned that it might end up in this unenviable position, too, even though we're outside the Euro zone. This problem with governments not being able to persuade anyone to buy their paper looks as if it has the potential to become the tragic flaw that causes the plans to combat depression unravelling. The Euro zone Europeans who still have credit need to agree to more money for the IMF to help East Europeans and countries like Greece.
In fact, they need to stand up for Barack Obama because the Americans really seem to be thrown off balance by what's happened to them and ready to protect themselves from East Asian imports.
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I was listening to Desmond Swayne on Broadcasting House this morning and he seemed to be suggesting that we should have some kind of national event to celebrate the homecoming from Iraq. He seems to have interpreted the outcry about the abusive placards displayed at the Luton march of the Royal Anglian Regiment as some kind of vindication of the invasion.
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No walk this week but lots of digging to prepare some rough ground for an extensio to the amount of home-grown vegetable growing this summer - chiefly potatoes, runner beans and tomatoes but also sprouts for next winter. I've also had a trip to the dentist to have a tooth out. This was last Wednesday but I still feel sore.
I've read one good book - Oleg Steinhauer's 'the Vienna Assignment' - about a trustworthy East European secret agent trying to get back into the good graces of his masters in an unnamed eastern bloc country. It's set in 1967. It's like (and likened to) Alan Furst's books but the hero is less of a 'camera'and more interesting from a moral perspective.
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Lloyds Bank’s takeover of HBOS has –apparently – turned into a disaster. It seems as if Eric Daniels and Sir Victor Blank knew much less about the HBOS liabilities than anyone imagined – except, maybe, the government. The size of the Lloyds – HBOS insurance plan makes Lord Myners’ failure to stop Sir Fred Goodwin’s pension (the HBOS takeover and the government rescue of RBS were happening at roughly the same time) understandable.
These schemes for the government to insure the toxic assets of the banks give some more pointers to the scale of the economic crisis. The insurance scheme for Lloyds/HBOS alone would be enough to rehouse a city of 3 million (by buying them houses not by building them).
There are important questions that are not being answered such as how much of HBOS’s bad news was known by the bank when it asked it’s shareholders for more money in a rights issue last summer. Presumably, the bank must have had information to hand about how many of the bond issuers of bonds it held were defaulting on the interest payments. Clever people were saying as far back as 2007 that regulators and central banks needed to know more about the toxic debt situation and that pressure should be brought to bear on bankers to make them divulge it. But as far as a large part of the media is concerned toxic debt might as well be the Bermuda triangle or some kind of freak storm.
Clearly, the Treasury and the Board of Lloyds have been doing some hard bargaining and it looks as if the bank has had the worst of it. Does this mean that Eric Daniels and Sir Victor Blank will be forced to resign?). What made the government negotiate so hard when their very success looks like a failure – the public is even more convinced that HBOS is bad news and Lloyds has been virtually nationalised. The most likely answer WAS that the government thought that it needed to look tough. However, now that it’s acquired a controlling shareholding in Lloyds, it looks as if it was only being tough with itself.
In fact it looks as if Eric Daniels and Sir Victor Blank will stay. The shareholders they let down (if they let them down) are no longer in control. Why they wanted the merger to go ahead is a puzzle. Granted that events moved so quickly that Mr Daniels didn't have tome to go through the accounts as thoroughly as he would have liked but they must have realised that HBOS was on the table because it was in dire straits. So the argument that they didn't realise that they needed to do their homework on HBOS all over again seems unconvincing.
Whether the government was a tough negotiator because it needed to look tough or because of the danger of the toxic assets breaking Lloyds, the only conclusion to draw is that these are desperate times for the government. Coupled with the comments on quantitative easing to the effect that it’s the last throw of the dice for recovery plans, it looks as if we could be closer to a political crisis, as well as an economic one, than we yet realise. In a few months’ time we may look back on Lloyds’ talks with HMG and be amazed that they received so little coverage.
In fact, to return to the detail of the Lloyds asset insurance plan, the Chancellor of Exchequer did say something along the lines that the plan was a vital step in clearing up banks’ balance sheets and getting them lending again, so maybe the worst of the crisis is over. Unfortunately, not many seem to have taken up that tune.
Perversely, it may seem, I wouldn’t particularly blame the government if there was a political crisis. Gordon Brown and Alistair Darling are, as it were, attempting to fly when air pressure is very volatile, so some turbulence is to be expected. The Conservatives don’t sound as if they would be happy or prepared to take over the government tomorrow and a lot of the business and financial comment reads as if no one has any ideas save a return to normal at some unspecified date in the future. That Observer feature on the crisis getting worse talked about the effect of slumping share prices on pension funds and a lost decade for shareholders – meaning that share prices (and unit trusts) are back where they were 10 years ago. This seems like sloppy thinking, though. Investors will have lost out if they hadn’t sold any shares before the price fall last year but a lot of shares will have been sold – that’s why the price fell. Of course, a lot of the selling was done by the undeserving super-rich but some of the shares would have been sold by more ordinary people paying for weddings, special holidays or annuities (so hardly just money down the drain).
There are two points that follow on from this. Firstly, the sell-off of 2008 must mean that there are substantial piles of cash sitting around, waiting for investment conditions to pick up. Secondly, and more importantly, societies that have seen real destruction, can climb back relatively quickly. To take an extreme example, Germany in 1946 was in ruins literally and ideologically but within the 25 years the situation had been transformed. Moreover, in some ways the journey towards wealth was probably better than the arrival. Likewise, the current situation needs creativity; just bemoaning financial losses is exactly the way to see the problem to ensure that solutions won’t come to light.
Now that the G20 summit is getting close, it’s beginning to look as if the best policy would be to expect nothing, so as to leave some space for a pleasant surprise. Apparently, the US government and regulators have indicated that they don’t think changes in regulation are the top priority. This makes sense but the Europeans may decide that the US (and Chiina) can do all the kick-starting and they’ll come in later.
If the US and the EU are going to try to close down the tax havens, they might get around to trying to re-introduce fixed exchange rates – maybe not in April but further down the road; that really would be the end of globalisation as we know it.
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I’ve been on one excellent walk since last posting. This was a walk around Brook more or less, including using the only footpath to cross the Witley Park estate for the first time and a walk across Holmen’s Grove. Apart from a stretch on the A286 it makes a good round walk – if rather long. that was 10 days ago.
Last week I had a short walk at Tilford – after very tasty asparagus and goats cheese risotto at the Barley Mow. This walk runs parallel with the last stretch of the northern branch of the River Wey to Tilhill House before turning back towards the village.
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1. Coalition government
2. The media
3. Embezzlement
4. The station
5. Byzantium
Tuesday's news about disagreement in the Parliamentary Labour Party (PLP)over the part privatisation of the Royal Mail made cooperation between the government look more imminent than I had expected. A couple of days later the possibility of the government being rescued by the Conservatives and Liberal Democrats looks less likely but it set me to thinking some more about how a coalition might come about.
I can't see the discipline of the PLP breaking down completely because the government AND the rank and file both want to keep on spending huge amounts of money - and that, to me, does seem the right way to go or a while. In fact, theoretically the BIG SPEND could carry on for as long as there were no financial interests with sufficient clout to call a halt to it by announcing that they had lost confidence in the government, the UK economy and Sterling.
Right now there don't seem to be any obvious candidates - powerful financial interests that are inclined to give the Uk economy yet another kick. Jim Rogers expressed a pessimistic view of Sterling a few weeks back but it's not clear that talking down the currency will do any investors any good now.(It might if there was a real panic as money would flood out looking for safety someplace else and whatever it went into would benefit. At the moment that doesn't see to be happening; the low value of Sterling is causing investors to stick with cash or invest at home. As a result the London stock market seems to be doing slightly better than the US one.)
The likely flash point in this benign scenario of the UK government(and others)spending their way out of recession and collaborating with one another for the greater good is some kind of global shortage. This could be an oil shortage triggered by some conflict in the Middle East - though that seems unlikely. Alternatively a food shortage great enough to give a really big boost to the cost of living might be the spark. Any event causing a spike in inflation would cause a real flight from weak currencies and then spend, spend, spend would have to be reined in. That would trigger a political crisis (pretty quickly) and a coalition government would start to look a lot more likely.
Earlier today I was reading another doom scenario that involved the Chinese refusing to buy sovereign debt from Eurozone countries whose finances are in bad shape (like Italy and Greece). This would lead to a Eurozone crisis and a sharp fall in the value of the Euro. I think this would be a dollar shortage crisis instead of commodity shortage crisis. It wouldn't do the UK any good either as there would be a sharp drop in the demand for London hotel accommodation, whisky, shortbread and other items we export.
This is all scare-mongering in a way but the point is that the individual countries and nations collectively need to work really hard at making sure these things don't get out of control. This takes us back to the idea that the government has too much to watch out for to be able to indulge in normal party politics.
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One of the surprising trends of the last few months is just how negative the media have turned out to be about what's happening to the economy. There's a lot of sober analysis that's helpful but on the whole objectivity has flown out of the window.
Another feature of news coverage in 2009 has been the media's lack of interest in what's going on (and going wrong)everywhere else. The hearings of the Treasury Select Committee and news about Sir Fred Goodwin's pension may be interesting but they tell us precious little about how the UK is going to get out of this mess - recovery and stimulus packages in China or America tell us more. And protests in Eastern Europe show us more about the shape of things to come.
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We've been mesmerised by the Madoff and Stanford scandals but they don't really tell us a lot about what the future holds. JK Galbraith in his book on the 1919 crash pointed out that embezzlment(s) came to light after bubbles burst because fraud was easier to hide when money was easy.
Accountability works best as a check rather than punishment.
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No walk this week so far but one item of local news is the car park at the local station has been extended. The station is about 13 minutes walk away or 10 minutes from the edge of the village. Consequently, there are relatively few people who can conveniently walk there - the road has street lamps and a (very narrow) pavement but it's also liable to floods in wet weather.
Recently, I had occasion to park in the car park at lunchtime but discovered the cheap rate for a ticket only started at 4 pm (instead of 10 am)and the cost of an ordinary car parking ticket had gone up to £4.50. This means that most people who want to catch a train to Guildford in the middle of the day are paying as much to park a car as for a cheap day return ticket.
Clearly, it's worthwhile for Network Rail to make the car park as big as they can though whether there are that many more folk who can afford to use it is another matter. It doesn't look as if the car park extension has gone quite according to plan. A four foot high bank has been tarmac-ed over and markings painted over the top but at present there are plastic barriers to stop you using this section, presumably because it's too steep to drive up.
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The train ride was actually to go and see the Byzantium Exhibition at the Royal Academy. Interesting stuff but rather gloomy setting. The best items were the humble glazed pots with a peacock motif. The valuable Christian works didn't appeal so much; it seemed the artists and craftsmen were just too sure they knew what was what so I ended up feeling crowded out of the spiritual space.
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I've been watching the Bloomberg page with the FTSE 100 on it today to see what happened to Lloyds Bank. It carried on going down first thing this morning and then started rising so that for quite a lot of the day it was the day's top riser. Now it's started falling again and, last time I looked, it was the index's biggest loser.
I was taken by surprise by the massive sell off on Friday. After all, what's £1.5 billion of losses for a modern banker? In fact, in the case of Lloyds it was about 10% of its market value at friday lunchtime. Hopefully, this talk of Lloyds' superior and stricter valuation method (compared to HBOS's) is true but they could have done with preparing the ground for the announcement.
My view is that the government shouldn't take Lloyds over but, of course, we all now know that things can be much more dire than we realise. incidentally, the current government in general and Gordon Brown in particular have ben given a lot of stick for not doing enough to protect final salary pension schemes. The Lloyds/HBOS merger could be another nail in the final salary coffin if it doesn't come right because in effect Lloyds TSB shareholders stepped in to save the government from having to take over HBOS outright and most of those shares are in the hands of pension funds and life assurance companies (presumably).
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After all the gloomy news over the weekend, it's beginning to look like the politicians haven't quite risen to the enormity of the challenge facing them. True, Ed Balls has warned us that the economic situation is the most serious in a hundred years and we can assume that he wasn't completely off message. On the other hand, the Treasury Select Committee's interrogation of the bankers last week didn't shed much light on possible ways forward. Apologies, sincere or not, really don't cut it as a solution to the problems the world faces now. And even Mervyn King is saying that the government can't start saving revenue now, which is what the Conservatives appear to want.
Aside from the fact that no one can remember the Conservative Party minding about banking models before 2008, the underlying problem is that the UK's political establishment don't seem to realise that public don't entirely believe that there's enough talent among all the parties to sort out all our difficulties. They need to start thinking that the alternative to the present government should possibly be a national government.
Although, I don't believe the blame game is going to get us very far, I do see one exception to this. The Tories shouldn't be taking too much heart from Gordon Brown's falling popularity; the fact of the matter is that popularity is not really what's needed now. Everyone can all enjoy moaning about the Prime Minister but the important thing is the belief that he and the Chancellor aren't in a panic.
Mention of a coalition government brings to mind wing collars and pince nez, appeasement and failure to help Republican Spain. In particular Labour politicians see it as a wilderness period. However, it also saw the beginning of successful rearmament and a long period of above trend investment in industry.
If UK politicians and their counterparts in other democratic countries don't work together more, not only will they not have enough collective wisdom to sort out the economic problems but they won't have the capacity to face down (or merely solve)threats from abroad either.
The likelihood is that we won't see a coalition government but the main political parties should at least act as if it was a sensible next step.
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The same need for working together is evident in the US, too. Tim Geithner's plan has come in for a great deal of criticism but adversarial politicking doesn't seem to be the right environment for the clever ideas to rise to the top.
My own view is that the federal government should just guarantee everyone's mortgage payments against the threat of unemployment. that would remove a lot of the fear that's paralyzing America and solve a big proportion of the toxic asset/debt problem. It also gets around the trust issues that come up if plans to insure the banks against their toxic assets or have a 'bad bank' buy them are considered. Of course, there are different trust issues but they involve ordinary people rather than bankers.
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I've had one good walk, in the vicinity of Chiddingfold. Very pleasant but also very muddy. It connected two walks I've had previously.
On Saturday we took off to the beach which was great. The vehicle access to West Wittering is going to close for road repairs today, for 3 weeks, so we were glad we didn't postpone our visit for another week. While we were there we saw what appeared to be a German Shepherd club having a communal walkies - a very odd sight - like a tribe heading off to celebrate the solstice.
Sadly, the Squirrel Inn at Hurtmore, great for beer and grub, has closed all of a sudden; I'm still trying to find out what happened. The Wood Pigeon at Wormley has also closed but longer ago, I believe.
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I guess the high profile parts of the banking industry were pleased and relieved to be able to share their unpopularity with local authority officials and head teachers. Although, now the storm over bankers’ bonuses is gathering power, they may need some further real storms to give them the cover they need.
This taste for blaming is no good for blogging. Aiming shots at specific wrongs is fine but when we're a deeper hole, it doesn't work to just crank up the volume criticism.
In fact, some of the UK banks’ shares did quite well last week. Lloyds bank shares are worth more than £1 each and even RBS shares are worth almost 25 pence. Reading some investment commentators – as I do – there’s also been quite a lot of talk about the way in which the stock market acts as a ‘leading indicator’ for the economy. The theory is that the stock market will start to rise about, say, nine months before the economy as a whole starts growing again. Without wishing to pour cold water on any green shoots of hopefulness, I think there could be some wishful thinking here. Stock market investors aren’t as frightened as they were back in October and November; they’re not sure if they should be scared or sanguine about the market now. In those circumstances, it’s really comforting to think that a bit of a stock market recovery will be followed sometime around next Christmas and New Year by brighter news about the economy (causing another rise in share prices and so on). But the investor may be making too much of the link. Although some GDP growth may help to bed down a recovery in the stock market, the stock market can’t make the economy grow and the economic recovery might take years to recover and that could make the stock market fall back again.
It doesn’t look as if everything is going to go back to the way it was that easily. Of course, talking of getting back to where we were may not be the right way to think about the current situation. So ‘returning to normal’ is too small an idea for the predicament that we’re in.
I heard a quote that sums up a lot to me but although I think the original words were President Roosevelt’s (FDR), I’m not sure. The quote goes something like this: “What America is able to do, America can afford to do.” It may have been “What Americans can do,…..”. Anyway, the point is that the quote sums up just the right attitude to endeavour and evaluating national life that’s needed nowadays. This kind of endeavour means that a country can make or trade for everything it needs, that the common good is furthered and that each generation makes the progress that’s needed for the next to prosper. That’s what America or the UK or any other country can afford to do and can’t afford not to do.
On this measure, it seems as if the Conservative Party’s ideas about the government budget are too short-sighted. Balancing the budget is only a means to an end and right now it looks as if it might be harmful – but not to sufficient numbers of potential Conservative voters to make the party’s leaders rethink the policy. Equally, the government has a reputation for wastefulness to overcome and it needs to be careful that there’s no Sterling crisis.
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I’ve had one good walk in the last 10 days. Yesterday I walked on Royal, Bagmoor, Ockley and Guinea Commons in the remains of the snow. Although I recognised where I was, there was just enough snow to make it difficult to work out where the paths went. The best part of the walk was out from under the trees on the edge of Ockley Common, looking up towards the Devil’s Punchbowl with a very clear sky. The Met Office is 60 per cent certain of heavy rain tomorrow but no more snow this far south.
I’ve been reading ‘Time’s Witness’ by Michael Malone. It’s about 500 pages long so it’s taking a while but I like it. The subject is a plot involving the murder of one (black) man and the retrial of his brother, who’s on death row; sort of ‘To Kill A Mocking Bird’ (for adults) crossed with John Grisham’s ‘The Client’.
We’ve started planning a holiday. We’d like to go back to Coll but are also considering Barra in the Outer Hebrides (which we’ve not visited before).
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i see that blog.co.uk is no longer carrying adverts. I don't particularly mind as some of them weren't very appropriate. However, I hope blog.co.uk aren't too adversely affected.
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Last week was too busy; too much work, no relaxation, no posting and certainly no proper walk. Today's post will include stuff on the following:
Gordon Brown and the crisis
BBC and that appeal
Back to the crisis
What are the alternatives
Gordon Brown was back on the Today programme on Friday. But why he was broadcasting wasn't clear because all that we heard was that the financial crisis was a global problem and that the Conservatives were just sitting on their hands. Both of these claims have an element of truth in them but the Prime Minister can't just go on repeating them for the whole of 2009 (and part of 2010). It seemed as if the interview was just a pre-emptive sting drawing exercise ahead of the announcement of the second quarter of negative growth (or was it the unemployment figures?). Evan Davies didn't see to know what to do with him.
Credit to Mr Brown for keeping up with the 'appearances' on the radio but he does need to have new things to say. if he keeps on repeating himself, it just feels like we're all being kept in after school. Furthermore, some of the things he said don't ring true: - our national debt low; well, only if one takes all the civil service and military pensions, which the government will have to find the money for, out of the equation.
Earlier in the week Alistair Darling and Lord Myners made a better stab at explaining the government's latest scheme for protecting the banks from their own toxic investments. At least he was talking about current stuff and trying to explain what was going on. However,it's probably a measure of how stretched the Treasury is that we seemed to hear more about what David Cameron and Nick Clegg thought of the plan (not much) than how the government intended it to work. And it's still not clear if it's really government bail out Mk 2 or if the government should have had a toxic asset insurance scheme back in October or if it's a coherent second stage.
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Speaking of Evan Davies,; his series on the financial crisis on BBC2 on Wednesdays has been very illuminating.
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The BBC's decision on the DEC disaster appeal seems perfectly correct. The real issue about disaster emergency relief for Gaza isn't really raising the money, it's persuading the Israelis to let the emergency supplies across the border. Hamas itself could, apparently, pay for a lot of the relief with cash it holds but, of course, the Israelis wouldn't stand for that. Whether or not the supplies are allowed across is the new focus of the struggle and the recipients are just hostages of the situation. Clearly, there are different views about who is most at fault here and the answer partly depends upon how long a view you take. In the short term, there's a clear need for the aid but letting it through would be a kind of victory for Hamas. A longer term perspective might suggest that letting the aid into Gaza allows Hamas to carry on being more anti-Israeli than they are FOR their own people. also, although they have popular support there must be some doubt as to how freely it is given.
The effect of the DEC emergency relief on this equation is to put more pressure on the Israelis to allow relief supplies in than, say, if it was just donated by Saudi Arabia. Because of this it seems to me that the BBC (and Sky) made the right decision and Douglas Alexander and the Chairman of the Charities Commission had no business interfering. Tony Benn said that the BBC had given into the pro-Israel lobby but you might just as well say the corporation have stood up to the Labour government. It was badly done on Alexander's part.
Of course, as many have pointed out, the rights and wrongs of supporting the appeal financially is quite a different matter from the BBC's decisions about giving it air time.
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Having now nearly finished Robert Peston's 'Who runs Britain?' I'm more impressed than I was. I particularly enjoyed reading about the goings on of Philip Green and Stuart Rose and M&S. However, I'm not so convinced by the the implied argument that seems to run something like this: capitalism is wonderful at allocating capital fruitfully but private equity went to far. Capitalism may have looked pretty good if you were an investor or had the kind of career that the people Peston writes about have had but I suspect that the careers of most people in the private sector leave them feeling that capitalism is pretty dire at allocating human resources.
Many people must wonder to themselves why they have to work as hard as if there was a war going on when some of the things they are asked to do are so such stupid things. People daren't protest because most companies have a top down command structure and they know that the bosses don't really want to know. Wisdom is a one way street and the same holds for relations with customers.
Now, all this is more open to question than it has been for a long time. Big companies may be the best way of doing business we have but their record for providing job satisfaction, customer satisfaction, job security, pensions and increased national wealth looks dubious. For the time being companies may try to restore the status quo by requiring their (remaining) staff to work harder and the staff may try but it doesn't seem at all sure that approach is going to restore prosperity.
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William Keegan was hinting in yesterday's Observer that there might be exchange controls around the corner - at least it looked like that. Maybe the crisis summit in early April will see some strategy for cooperating on exchange rates.
Actually, Jim Rogers, who made the 'sell sterling' comment a few days ago is famed as an investor in commodities. And this looks like another areas where there might be some collaboration by governments or other developments. In part the inflation of 2007 and the first part of 2008 looks to have been partly the result of speculation in commodities (especially oil)so the cost of living indices don't seem to be doing what they used to. What we really need is an inflation index which calculates how much of the inflation is due to people investing in commodities. Buying commodities because you need them is fundamentally different from buying them because you reckon they'll store or grow value for you. The latter type of purchaser is always going to have to sell at some stage.
With energy companies already offering to let you lock on to a particular price for a few months, it may not be long before ordinary folk go onto a price insure website and guarantee themselves petrol prices or gas bills.
The way it would work would be something like this: you don't want energy price rises and falls making your bills fluctuate so the energy company offer you a deal that smooths the changes for you with, possibly, a trend upwards or downwards. this part might be a bit of a gamble for the customer. In fact it could lead to a whole new kind of gambling. It must be happening already somewhere.
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On the personal front, we've done our bit to fight recession by acquiring an analogue dvd recorder from Comet. with all the talk I was expecting the shop to be empty but it wasn't quite like that. we've managed to play a pre-recorded dvd and to record from BBC2 but haven't quite worked out how to record the Freeview channels.
Hopefully, there'l be time for a walk this week.
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I had one short walk last Thursday when there was a lull in the bad weather. It had to be a short walk because of the work schedule. I went to the Dunsfold area and had a walk that took me either side of Hookhouse Road - and along it for a couple of stretches (it's really just a single track lane). The first part of the route, walking westwards towards Vann Lane, gives the best views - up to 30 miles in a southwesterly direction. After a few minutes you turn southwards and into the trees (this is in fact part of another walk).The farthest point of the walk was Dunsfold Church. From there it's just a few minutes to Dunsfold village; but this is the first time I've walked there. The walk straddles two ordinance survey maps but only takes 70 or 80 minutes.
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After Friday afternoon's turmoil for bank shares, I'm not sure how to gauge the current situation. Robert Peston is saying it's not as bad as it was just before the original bail-out of RBS and HBOS but they were within hours of failing, so it could be pretty serious now. Certainly, today's Observer was painting a grim picture with talk of a rescue for Barclays (shares down about 45% last week)and the threat of a run on the currency.
The government seem to have been relatively quiet. Possibly, they are too taken up with the crisis to have much time left to explain exactly what they think is happening and the situation is too uncertain for them to make predictions.
Will Hutton seems to think that the crisis is going to need a lot more government spending but we must be getting close to the point where the government have got to start talking about some government saving in order to ward of the possibility of a run on the pound, he referred to. That gives the government a lot not to talk about.
The talk of a bad bank to look after the banks' toxic loans shows a few things into sharper relief. It's beginning to look as if the banks have been pretending that things were better than they were. Now we're being told more of the bad news the banks and the regulators are going to be utterly discredited. The regulatory system is going to have to be rebuilt. With so much attention on mortgage and small and medium-sized business lending, and such a big increase in the sway of government over the banking industry, it looks as if hedge funds and private equity are going to have to hibernate for a long time. In fact it could be the kind of sleep they never awake from.
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I don't have a good enough understanding to know if the FSA truly deserves all the bad press it's getting about allowing short selling of the shares of financial institutions to begin again. However, aside from the obvious illogicality of one lot of investors lending their shares to another set who use them to drive down the prices of the same shares, it seems to me that short selling is a) a good way to destroy the value of assets b)a good way to stop the owners of companies floating them on the stock market c) another idea that turns to disaster if the herd develops an interest in it. Anyway, it seems to be another nail in the regulator's coffin.
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We've been hearing about riots in Iceland, Greece and lots of countries in Eastern Europe. Coupled with the dispute between Russian and Ukraine and the dire situation of the Russian economy and the Russian government's finances, this looks like the storm that western leaders are too busy to attend to at the moment.
Although, lower oil prices is one of the few things that look good economically speaking, if they contribute to economic melt-down in Russia, they probably are not such a good thing after all.
Next time I plan to have something cheerful to post about.
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Not surprisingly, there's not a lot to report on the personal front because I've been busy working.
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The news I've heard most of is the Israeli attack on Gaza. It looks as if it should be a disaster for Israel as far as world opinion is concerned but that Israel's leaders are keener to be feared on the world stage than admired. This, apparently, makes sense as far as the Israeli electorate is concerned but it seems open to some doubt that they'll be able to rely so heavily on the goodwill of the US as in the past. Not only will President Obama have his hands full with pressing domestic concerns but pro-Israel lobby groups may be less effective than normal if the downturn lasts for longer than expected. The one thing that seems to have been guaranteed is that the (pointless) attacks on the Israeli civilians will continue, if not in the form of rockets fired from Gaza, then by some other means.
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Speaking of the downturn, it's already looking as if the autumn's predictions that growth would return by the 3rd or 4th quarters of 2009 were too optimistic. All the measures taken so far haven't succeeded in re-starting bank lending. The UK government looks as if it has been out-manoeuvred by circumstances and this on its own means that the recession is going to go on for some months longer than expected. The should be able to crack the problem of bank lending to business by guaranteeing virtually all of it.
In fact, if it wasn't such a bad time to be a banker, guarantees like this would make it an extremely auspicious time to be one. After all, even in normal conditions banks expect to make some losses on their business loans. It's difficult to see how the government could make them pick up the normal amount of lending losses without confirming them in the view that it's best not to lend at all.
Gordon Brown was on the lunchtime news saying that the Conservatives are claiming that they could implement a loan guarantee scheme that would cost the taxpayer nothing.
In fact the political debate has a special air of unreality at the moment as if the two parties were in parallel universes. Because, of course, the Conservatives don't have to come up with any immediate solutions. They could, if they wanted, put their weight behind the government's crisis measures but they don't want to. So all they have to do is think creatively about what to do in Spring 2010.
It's not entirely clear with some Conservative proposals if they're designed for the parallel universe where they might be fighting the crisis themselves or are real plans for when they've won the next election. The announcement about the reduction in basic rate income tax on savings income and the increase in old age pensioners' tax allowances were made to seem like part of the answer to the crisis but as they can't be implemented for about 16 months they can't be. Nevertheless, they were an effective way of reminding savers that the Conservative Party is their friend.
Simon Wolfson, the Next Chief Executive, was on the radio last week, saying that the government should be doing more to save money (like the Conservatives recommend) but it's difficult to see how they can do that without making the unemployment problem even worse by laying off public sector workers - and that doesn't seem very likely.
In fact the Conservatives stress on saving is obviously wrong-headed. If the whole world starts saving, we'll really be in trouble and there are many parts of the world with better reason to save than UK citizens; the Chinese for example, who have to pay for their healthcare.
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While the Conservatives don't seem to have much vision but do seem to have a very powerful sense of entitlement, and have been a pretty rotten opposition over the last 11 years, there are a couple of areas where savings could be made. First on my list would be the identity card scheme. I'd been hoping that government incompetence with IT projects would put paid to this idea but now there's talk of a government store of all the e-mails we send so it looks as if surveillance is still a core belief for the government. My guess is that millions find this a very sinister idea but ther's no one courageous enough to champion the cause.
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I've noticed that others sometimes start off posts in that way and I often feel like that. However, I'm not sure that it's strictly true; more a lack of confidence that the posting is going to be any good. It seems to me that, if there's some urge to blog, there must be some inspiration somewhere, waiting in the wings. So I tend to see these admissions of failing inspiration as blogging in first gear before really getting going.
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I'm not sure that there's a lot of point to taking a view on the shape of things to come in 2009. All the forecasts seem to be taken up with guesses as to how long the horrible economic present is going to carry on for - rather than picking out anything new to look out for in 2009. And even the hedge fund managers and private equity partners were more creative than that. peaking of whom, I was given Robert Peston's 'Who Runs Britain?' for Christmas. The answer, according to Peston, seems to be private equity. I'm a fan of Peston on the radio and the BBC website but on the basis of what I've read so far his analysis is better than his writing; he tends to repetition and seems to find it difficult to switch from analysis to illustrative quotes - and back again.
Grodon Brown's reputation (the one for sound financial sense, I mean) takes a serious knock from Peston who makes it pretty clear that the Prime Minister has made big mistakes in his tax policies in regard to private equity. So, I'm not so sure that Mr Brown is 'the answer'. Rather, it seems fairly certain that he's not got all the answers for the medium and long-term future but creating liquidity, supporting business and stimulating the economy still deserve a fair trial in 2009.
(Over Christmas I met up with some family who were over from Ireland, where, apparently, the government of the republic is taking a good house-keeping approach to the financial crisis and trying to keep its budget balanced. It seems to me that the Irish Republic could cause a crisis of confidence if it tries to spend its way out of recession and get into trouble with the European Central bank. But they may find that some benefits spill over from the efforts to give an economic boost in the UK and other countries. Of course, the UK could spark a crisis of confidence, too, but it's got a better chance of reflationary policies working than Ireland.)
The trouble is that, if these policies meet with anything half like success, the Prime Minister will take all the credit and could snatch an undeserved election victory in 2010. So what's needed is some way of making him share the credit. The Tory leadership seemed to have looked at this conundrum and decided that it was beyond solution (or too much of a risk); hence their alternative policies. This looks like a mistake as it makes it look as if the Tories are happy not to be in power, to wait until Spring 2010, rather than a party that's desperate to save the nation. They're right to see that they could up sharing the blame for a failed attempt to rescue the economy but are very unlikely to share the credit with a politician like Gordon Brown. Nevertheless, it's their own lack of purpose and momentum that are partly to blame for this dilemma.
As well as being very unlikely to share credit with anyone for avoiding a slump, it also seems unlikely that he'd be able to steel himself to begin the painful corrections that we've been told the country must undergo - repaying the national debt, nurturing a saving mentality, fostering manufacturing. In this way his very success could be a postponement of a yet more evil day (in the same ways as Alan Greenspan's policies are now said to have been).
Of course, the real agent of change is going to be the United States and the rest of the world. Barack Obama will be leading a new New Deal in the US and there's no knowing how successful that will be. If he comes unstuck,there's no question that similar policies in countries like the UK will go into reverse. The UK version could still hit the rocks if overseas investors discriminate between the US and smaller economies (and currencies) like our own.
In reality, the Prime Minister's reputation and power will be adjusted down to their true scale by any successful efforts to combat recession by the EU. True, he may look good engineering agreements for confidence-building moves but the working out of these policies will have the longer-term effect of re-sizing him downwards.
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We've been for four walks in brilliant but freezing weather - Blackdown, the Wey-Arun Canal at Loxwood, Witley Common and the beach. Today, it's dull and freezing so we've stayed at home. I've 'planted' my shitake stump - it's a method of cultivating mushrooms from a length of cherry tree wood.
We had a trip to Rutland to see family (over from Belfast)and I've done a fair amount of reading, some of it for the next writing project. I've also read one of Hakan Nesser's novels featuring the detective Van Veeteren, 'The Return'. The only problem with these stories is with the mixture of Dutch, German and even English names, you never know what country the action is supposed to be taking place in.
Happy New Year.
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We had a walk on Saturday at 'the duckboard' aka Thursley Common. On the whole the weather hasn't been good enough to lure us out. However, I had longish walk on Wednesday over by Hascombe, long enough indeed to be stuck up Hascombe hill in the dark. I just managed to forget about it getting dark at 4 pm. The darkness wasn't absolute but under the trees there wasn't enough light to read the map by. Thankfully, I found a dry path back down to the bottom.
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Catching up with the parts of last Sunday's paper that I hadn't got around to reading when I last posted, I was struck with the Observer's strong case for some 'New deal., style investment in infrastructure. Andrew Rawnsley was advocating more spending on the railways, renewable energy and the electronic super highway.
That all sounds good - how about an orbital railway for London - but I'm not sure if even that would be enough to pull the UK out a recession lasting years. In fact, my understanding is that the New Deal may have mitigated some of the effects of the Great Depression but that it took Germany and Great Britain going to war to really restore America to prosperity.
Back in the present there do seem to some leaders with a feel for the real dangers of a serious economic slump. Dominique Strauss-Kahn was interviewed on the 'The World at 1pm' the other day and he seemed to be aware of the threat to the social order. I reckon that Gordon Brown does, too, but that some of the cabinet need educating in this connection.
Would Andrew Rawnsley have been plugging a point of view that he reckons the Prime Minister has already decided to run with? Quite likely. Why haven't we heard more about 'investing to recover'? I think the answer to that is that neither the government nor anyone else knows quite how much recovery will be needed. Commentators and economists are still trying to work out how big an effect the financial crisis will have on things like consumer spending. By next Spring, everyone should have a much clearer picture and we'll hear a lot more about a recovery programme.
I'd guess that moves to restart house building will be one plank of this programme.
As I've said before, I think we're going to find ourselves in something of a leadership vacuum for the next few years. Although Gordon Brown's reputation has shown a phoenix-like renewal, a lot of business reputations are just dust now. People aren't saying so yet but this loss of reputation is like the middle post of the washing line falling over; political reputations are going to be more vunerable, too.
Although, commentators are saying that assets haven't reached a floor and have further to fall, one hopeful aspect of the current economic problems is that the worst affected country, the United States, isn't any longer the world's most potent overseas investor. China, the Middle East and some other countries (Singapore, Japan) do still have wealth for investing. It's just that they're not going to be as respectful towards the old global elite in the West. In a few years' time we're going to be much more accustomed to non-Western icons and idols. Whether they'll be subjected to any more rigorous examination than the old ones remains to be seen.
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This is likely my last post before Christmas so Merry Christmas to any who got this far!
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Last week was the first for a while when controversy about dealing with the economic crisis appeared to outweigh the sense of common purpose - more disunity than unity. The consensus in our sunday paper - we're back with the Observer - seemed to be that Peer Steinbruck's and David Cameron's fiscally conservative approach is unsound and that for the whole world to start saving would be in nobody's best interests. The conclusions to draw from Steinbruck's remarks seem to be that European unity means very little and that the UK media are easily rattled; otherwise they wouldn't have taken comments that were intended for home consumption so seriously (the interview was in Newsweek, not a British paper).
The media also seemed unnecessarily rattled by the news about the US Senate stymying the rescue of the US auto giants. The latest problems of the car makers look to be more a symptom of the downturn rather than a cause of more serious trouble, except, of course, in Michigan. we already knew that the car industry was being knocked by the crisis as a new car must be one of the most discretionary purchases of all. yet, even though we'd heard this bad news already, together with supporting evidence such as the drop in UK car registrations, the media seemed determined to mame the senate vote in new bad news.
The media also seemed dot be doing their best to make the worst of the drop in the value of the pound, In fact, unless the pound drops precipitously so that the price of food and petrol starts rising again, it looks as if the fall in sterling is a good thing; more visitors to the UK, more UK exports and a boost for anyone, any company or its pension fund with foreign assets. It shouldn't even seriously affect the government's ability to borrow money. Presumably world finance is just waiting until sterling has reached its likely bottom and then they'll all pile in to gilts and make pots of money - rather like would-be equity investors are waiting to see if the stock market has really reached its lowest point before they pile in there. Yet John Humphries was like a dog with Dvid Milliband's trouser leg over the exchange rate when he interviewed him on Friday.
I've been re-reading JK Galbraith's 'The Great Crash 1929' (in conncetion with my latest writing project).As the first book of financial history I read it's had a marked effect on me. Galbraith makes the point that, although the speculation leading up to the crash in October 1929 was huge, the target of all the speculation wasn't laughably weird like the tulip mania in 17th century Holland or the South Sea Bubble in the following century. Americans in the twenties were only speculating in investment companies; and there's still plenty of that kind of institution around today - some may think that they're a bit 'old hat' but certainly not ridiculous.
The point is that the speculation in this decade looked even less extravagant than the stock market boom of 1929. Those mortgage backed securities may have seemed abstruse but we didn't think they were the wonder of the age - it was just a mechanism that was good for business. The point was that unlike earlier bubbles, millions of people were drawn into it. So, although I think a lot of the crisis reporting is low on facts and analysis and strong on speculation, it looks as if some leaders haven't yet adjusted their ideas of normality sufficiently. They really do need to work together more on the world economy.
Nicola Horlick was being interviewed on the Today programme this morning and she commented that the Madoff hedge fund had been 'incredibly credible'. Madoff is alleged to have been a pyramid scheme so was an intentional fraud but a lot of the securitised investments also looked 'incredibly credible' until last year.
This particularly applies to the leaders of the European Union, who don't seem to realise how perilous the position of that institution has become. They don't seem to be able to agree on defence, energy security or the economic crisis and there seems to be a great gulf between ordinary people and the EU.
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On a lighter note, I had a great walk last week. I've now arranged for the full accounts to be drawn up (see last week's post). This is happening in the Haslemere area. After I'd met the accountant I went south to the hill above Henley. I started from quite close to the relay station, which is one of the most prominent landmarks in this part of the country, walking westwards, crossing over the A286 and passing Madam's Farm. After about a mile on this lane I turned right (northwards) onto a footpath which seems to have been colonised by badgers. This takes you to the escarpment overlooking Henley and Henley Common - though, as it's covered in trees, overlooking isn't quite the right word. I wanted to avoid hitting the main road (and losing too much height) because I hadn't got long so I turned off the path to the right and picked up another path a little further east. It's called the Serpent Way. this drops you down to the main road just above Henley. There's a bend in the road nearby so you need to listen out for traffic. Having skirted Henley you're on Verdleyhill and in one or two places there are fantastic views to the north east. After that I lost the footpath for a while so I only turned south at Poor's Common. The last part of the walk was along a lane. It was only 70 minutes in all but on a bright winter morning t was a delight.
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I've read one good book in the last week; Ken McClure's 'Hypocrites' Isle'. It's about medical research in Edinburgh. A good read and educative into the bargain.
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We've been staying in the Ribble valley again in a converted stone barn. The idea is to spend time with in-laws without them having to cater for us (they stay in the next door accommodation and we do the catering).
This time there was snow on the hills (and ice on the roads). It looked lovely.
We got back on Friday and now there's plenty to do. I've another book writing contract for a work on another finance topic. That's great and I'm looking forward to getting my teeth into it.
One less positive development is a communication from that part of HM Government that bears down on smugglers, and just about anyone else really. Apologies for coyness but I wouldn't like to be victimised as well as getting hot under the collar. They are asking for full acounts instead of the shorter version that seems to have been sufficient before. They are adamant about this even though the policy seems to obviate the whole purpose of Companies House allowing the shorter accounts in the first place and, once an accountant has been paid to do the work, there will be less money for the government.
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Of course, writing about investment at a time like this makes you think. I've not yet had a flash of inspiration on this subject - just a few observations to make.
I noticed that we weren't getting many prayers to get over the recession at church. This isn't indifference, I guess, more awkwardness about asking for material prosperity or a sense that there's a spiritual dimension to this and until we've got the measure of it, we're best keeping quiet.
Some of the financial/investment literature I read seems to be saying that we all get our financial desserts. But we really don't.
A quick check of the way the wind is blowing suggests that this really is going to be a bad recession and it's reached the stage of everyone talking it up. the only thing that I can say is that shopping doesn't quite seem to have gone out of fashion in the way that the media might lead you to expect.
As far as the financial community is concerned; the main pre-occupations seem to be,firstly, what the government is doing to get a handle on the situation and, secondly, the expectation that the stock market will recover before the real economy does. Discussion about this comes from all over the investing spectrum and is based on the well-attested fact that stock markets do recover before jobs, consumer spending etc.. However, I think the commentators and stock market investors are trying to avoid the fact that if the recession goes on for years, the stock exchange indices will stay flat for a long time. As well as that trying to spot the 'bottom of the market' (the time when a wise man or woman would start investing again if he/she knew when it was) doesn't seem very creative.
The really smart thing to do would be to invest for the long term* and go away and do something more creative. Investor confidence is like the proverbial 'watched kettle'.
One practical improvement to work for would be more objectivity in the media and general discussion about the situation. A couple of months ago when petrol prices were really high there were several mentions of people driving around less in order to save money on petrol but I never heard this claimed on any authority. The same seems likely to happen with recession talk - lots of hearsay and too few facts.
*In fact, the wisest advice seems to be to adjust investments from time to time , to take profits and re-allocate, but to do so very infrequently.
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I had an excellent but strenuous walk on Gibbet Hill just before going away. The map doesn't do this area justice because it's so up and down you don't realise the extent of it until you're there.
Half way down the hill a viewing platform for work on the Hindhead tunnel has been constructed and it's already fairly plain what the tunnel entrance at the northern end will look like.
After so much rain some of the steeper paths were like skiing in mud and leaf mould.
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1. Sterling and the Shadow Chancellor
2. changes to follow the crisis
3. The NW frontier
4. Personal doings, walk, an outing
5. Lactose free
6. Ouch, my back
Lets start with no. 6. I pulled a muscle - just bending over to replace outdoor shoes into the basket by the front door. So I'm 'discommoded' but hoping that if I do my best to forget about it, it should begin to feel better by tomorrow morning. But it's amazing how a small action that you wouldn't give a moment's attention to can have such an effect.
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As I understand it the G20 summit in Washington - that everyone seems to be saying was all talk and no commitmentto action - did end with a general agreement that every government is going to cut taxes and spend lots of money. So, as far as Gordon Brown is concerned, this is quite a result; it basically means that the Bank of England rate cuts (which had to happen or the bank's independence would have been at risk) and the spending and tax cut plans can go ahead without a lot of fear of speculators crashing the currency because all the other governments and central banks are going to be following very similar policies.
If that's the case, why didn't George Osborne think of that before he embarked on his arguments about the threat to Sterling? Though I hadn't heard of a convention of not saying anything that would undermine the exchange rate - given the performance of the UK economy for the last 80 years, that would have been a very restrictive convention.
Anyway, it seems that the Conservative Party are still out of touch with the new realities; they are still trying to score party political points when the public would like to hear more consensus. The times are scary and bad tempered arguments between the political leaders are not what the public want to hear. The political parties are programmed to revert to BTAs quickly because it's widely accepted (by politicians)that the public have a short memory. But, while it's true that recent memories often seem to sway elections (the Winter of Discontent did for Labour in 1979), the electorate ALSO have long-term memories. So some of us were still punishing the Conservatives for the poll tax and the poll tax riots in 1997.
So it wouldn't do any harm for the shadow cabinet to consider that they don't just need to be clever operators but leaders who've learned the sort of principles that would have stopped them falling in behind the government over the invasion of Iraq and are willing to (along with the rest of us) to learn some lessons in the future about the awful financial mess that's crept up on us.
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One of the changes that the financial crisis is (possibly) going to bring about is an end to public confidence in the competence of the current crop of leaders. That seems fairly obvious; a lot of reputations have crashed and there will be more. However, it's not just individual reputations that are at risk. The whole mindset that credits a (relatively) few clever people with the ability to fix things for the rest of us is being called into question. The media still peddle that point of view by and large even though the prosperity that bought people's acquiescence is so seriously threatened.
This bogus contract between the fixers and the fixed might be succeeded by some truly creative schemes for enhancing democratic debate and consultation but politicians need to pay the matter some attention in the next year or so.
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Yesterday's paper had a short item about the plight of Pakistani villagers who are having to seek refuge in inadequately equipped camps because of attacks on their homes by their own army. Children are dying of hypothermia.
It's not clear from the article what the plan is. There doesn't seem to be a coordinated plan to drive people into camps temporarily while the military take out the Taliban. The villagers don't seem to be receiving advance instructions about how to avoid the army's attacks.
It looks as if the locals in the frontier areas have lost control of their own destiny. The Taliban and Al Qaeda with their Islamic programme have quite different aims from the traditional goal of preserving tribal independence. Ultimately, while they may use tribal loyalties, they have no concern for the way of life. So we could be seeing the end-game for the local tribes. By the time the Pakistani government (and the US) have cut off the supplies to the Taliban for long enough to defeat them, they have could destroyed the tribes in the process.
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Last week's walk was from Marley Common and across the A286 (the Midhurst road). The route follows a no through road with a stream beside it. This is a tributary of the River Wey flowing westwards. It may be just a ditch sometimes but last week it was fairly full and flowing fast. The lane becomes a private road heading south from Valewood Farm House, along a secret valley. unfortunately, the public right of way leaves the road and heads across a very dirty field. You cross a lane at Wademarsh Farm House, cross some drier fields to a steep wooded slope. This bits a little tricky because the path is very steep and you're going down. The highlight of the whole walk is the view from Upper Sopers south eastwards - you can see as far as the South Downs through an opening in the nearer high ground.
You head down to Fernhurst, cross back over the A286 and head northwards to Marley Heights across Van Common. I'd planned to go round to Shulbrede Priory and Cognor Wood but I decided to cut it short. I did take a slight detour to visit the donkeys at Marley Heights.
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On saturday, we went to see 'Wuthering Heights' at Chichester Festival Theatre. This was very entertaining but we thought that having the same actors play the characters at all ages didn't work. The only time I ever read the book was in English lessons in about 1970. I'll read it again now.
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This year seems to have been my worst ever for sinus problems. In the late summer I was using a nasal spray at the doctor's suggestion (Beconase). This was great; absolutely no sneezing but there was a warning about only taking it for 3 months at a time because it would 'inhibit the natural production of corticosteroids'. I'm not sure what life would be like without natural corticosteroids but I thought I had better look around for something else. So I've started using luffa complex in combination with echinacia. This wasn't as good as the Beconase but gave some alleviation of symptoms.
As my final throw of the dice, I've tried cutting out lactose altogether. In turn I've tried soya milk, lactose-free milk and goats milk. The producers of soya and goats milk seem to be at war over their claims and at the moment I'm tending to favour the alternatives to soya. They (the soya camp) recommend that you don't use boiling water to make tea which seems an idea that's so completely depraved that I'm not sure the soya producers are to be trusted.
I won't go into the details of what goats milk does for you but I've been virtually sneeze free for about a fortnight now. Personally, I can't tell the difference from ordinary milk but I only ever use it with hot drinks.
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It's been pretty dismal all week in this part of the world but for the last two days I've been working on a freelance project, so I would have been indoors anyway. The work has been news analysis and I've analysed the news story about Eric Daniels' choice of directors for the new Lloyds megabank several times over. As a result, and notwithstanding my own reservations about the Lloyds/HBOS merger, expressed here a couple of weeks ago, I'll take it as personal affront if any of these attempts to save the Bank of Scotland actually come to anything. My forecast remains that this is unlikely. The simple reason is that HBOS's solvency problems could be so severe that only the government's offer to not submit the merger with Lloyds to a competition inquiry, and thereby permit the formation of what would normally be considered to be an uncompetitively large bank, is sufficient inducement for anyone to take the risk of being dragged down by HBOS.
That said, I still think that the Lloyds megabank solution is going to come under more fire a few years down the road. Maybe Lloyds will be able to sell of some of its parts before that happens.
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The attitude to the banks after the surprise interest rate cut by the bank of England was a surprise in itself. It's already been pointed out that the government's wishes for the banks to lend more and lend more cheaply may not be comptatible with the banks being able to repay the money the government has provided to them. However, there are a lot of other questions to be answered about the supposed advantages of lower interest rates. First of all, we may still see a bigger run on sterling caused by these low rates. How easy would it be for the government to stop UK nationals buying foreign currency? The government will lose billions in tax receipts on the interest paid on bank deposits but they may be more interested in being able to borrow more cheaply themselves. Unless the rate of inflation falls very rapidly, savers will be receiving negative rates of interest.
In fact it looks as if the Bank of England's Monetary Policy Committee are reckoning on just such a steep fall in inflation and that they've some truly awful forecasts. This week's 1.5 percentage point cut is another of those 'no one realised how bad things were until...' moments like the reference that Alistair Darling made to the worst economic conditions for 60 years, back in September.
As we've been told the right first question is not what effect the interest rate cut will have but whether it will feed through into actual interest rates paid and charged by the high street banks. Commentators keep saying that the real trigger for drops in real interest rates is a drop in LIBOR, and that that depends on the banks being able to trust one another. Granted that LIBOR has been dropping gradually for two or three weeks now, but it does seem strange that it dropped so much yesterday afternoon - after the MPC cut.
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I'm glad about Barack Obama becoming the next US President - and curious about how he's going to handle the crisis. I was taken by surprise at the significance that was attached to his colour as up until Wednesday everyone seemed to be saying that he transcended race, which I took to mean that voters were able to see the man, not the skin.
The new film 'W@ has been advertised a lot on the radio this week. Although I believe that a lot of President Bush's policies were wrong-headed, I'm amazed at public opinion turning on him like this. Have millions of people simply forgotten that they voted for him - twice. I guess it's just a scape-goating process but it seems ugly and counter-productive. After all, it's the voters who need to learn from their mistakes, not the ex-presidents.
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In the last two weeks, I've had two good books to read; 'The Hour of the Cat' by peter Quinn, and 'Zoo Station' by David Downing. Co-incidentally, the plots of both of them take place in 1939 and both deal with eugenics programmes, illicitly in New York and legally in Berlin. 'Zoo Station' had the edge as a thriller. 'The Hour of the Cat' takes place in New York and Berlin and while the depiction of the private eye, Fintan Dunne, is excellent, the chapters about the real-life Admiral Canaris and Colonel Oster are much less interesting. I'm still not sure if turning Hitler history into this kind of fiction is a good idea.
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Last week I caught part of a long address by Ben Bernanke that went out on Bloomberg TV. The subject was what should happen to Fannie Mae and Freddie Mac, or the GSEs as he referred to them (government sponsored enterprises). The options seemed to be: to make them more private, to make them more public or to introduce a system of covered bonds to finance lending in the residential property market. Apparently, these covered bonds are prevalent in Europe, not the UK but countries like Germany and Belgium. Anyway, Bernanke was very impressive in his command of his subject. However, what I couldn’t understand is why giving all this financial support to institutions in the mortgage market is such a great idea. I can understand that the US authorities need to help the institutions to get themselves out of the mess they’re in NOW but all these options for financing the mortgage market in years ahead seem to undermine the principle of making the lenders check that the borrowers are creditworthy and the properties are good collateral.
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The capital raising by Barclays from the ruling families of Abu Dhabi and Qatar is an area that I’m more familiar with because I had to cover ‘pre-emption rights’ in my latest work (which should see the light of day in March). As is often the case, I don’t think the press are very good at explaining the details. As I understand it, with the exception of rights issues, UK law only allows companies to raise relatively small proportions of share capital without needing to get shareholder approval in an extraordinary general meeting (EGM). However, there are two ways around this. Firstly, they can ask the shareholders for authority to allot shares ahead of the need to do so. In the Spring, Barclays asked for permission to allot about £0.5 billion’s worth of shares if it needed to and to sell a further £82 million. Obviously, the latest capital raising needed to raise a lot more cash than that.
The other alternative is to get the agreement of the institutional shareholders to allowing shareholders pre-emption rights to be breached through the approval of a body known as the Pre-emption Group which has the support of the trade groups of the big (institutional) investors. But the Pre-emption Group has guidelines that are much more restrictive than the kind of deal that Barclays had in mind.
Whether or not the Pre-emption Group, the institutions or their trade bodies said anything to Barclays, once they got wind of the ‘Gulf deal’, isn’t clear. It looks as if Barclays just dared the institutions to be obstructive when they do get to vote on the capital raising. As far as the share price is concerned it looks as if the institutions have wanted to punish Barclays. Those sovereign wealth funds who put money into Barclays in June must be feeling pretty sore; they’ve already lost a big proportion of that investment.
Basically, Barclays has pulled off the kind of deal that Goldman Sachs achieved with Warren Buffet a few weeks ago. John Waples in the Sunday Times said that UK institutional investors don’t have the fire power to make a company like Barclays bend to their will any more. If this is true, it’s not saying a lot for the UK economy if the country’s savings industry isn’t generating enough wealth to own most of one of its major banks. Hopefully, some of the sovereign wealth will see advantages in working together with the institutions.
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I've written about pre-emption in the following books:
'Corporate Actions, A Concise Guide'
'The Share Owners' Guide'(due to be published in May)
Publisher: Harriman House
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One thing that has struck me about the financial crisis (apart from the fact that everyone seems to have got bored with it now) is how little has been said about what it means. I believe the Bishop of Lewes said it could have been sent by God to help us be less greedy and I’ve heard on speaker on ‘Thought for the Day’ draw a comparison between the bail outs and compensation to depositors and God’s grace (quite clever that) and that’s been the sum of efforts to find any meaning in the credit crisis. Surely, there are some people who feel like praying that the world’s economic system gets back on track, imams who’ve wanted to point out that adherence to the principles of Islamic banking might have saved a lot of the grief, aid workers in Ethiopia who’ve wanted to tell us to ‘get real’.
Of course, we’ve now had two scandals to liven up our lives and distract us from thoughts of recession. As far as the Brand/Ross story is concerned, I literally didn’t know what all the fuss was about. However, my partner read a transcript of the infamous phone call and came to the conclusion that though poorly judged, it hardly merited the takeover of the news that followed. Not particularly provocative, in fact, not that being provoking is necessarily anything to be proud of.
I’ve been slightly more interested in the Mandelson/Oleg Deripaska/Osborne story and I’m inclined to suspect there’s more to the Mandelson side of it than the Conservative side. At least Osborne’s association with Deripaska seems fairly short-lived. Of course, the folly of either of them is striking. What part of the job description of a public servant or a representative of the people does visiting with Russian oligarchs come under. The most striking aspect of the story, however, is how little harm it’s done to Gordon Brown. Peter Mandelson’s visit to the Russian’s yacht simply seems to have pointed up the propriety of the Prime Minister and his UK holidays. Ben Bernanke actually cancelled a vacation in Myrtle Beach (S Carolina?) in August last year when the credit crunch first hit.
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No walks in the last week but hoping to get out this week.
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