Saturday, August 30, 2008

Alistair Darling's interview

Not sure what Alistair Darling was smoking when he told the Guardian that current economic times are "are arguably the worst they've been in 60 years".

60 years ago, we were labouring under national debt that was 250% of GDP, we still had rationing, top rate of tax was 99%, we had borrowed desperately from the USA (that loan was only paid off in 2006), the conditions of the loan required that the pound be made convertible, oil and gold priced in dollars not sterling and the commonwealth opened up to American trade. Not surprisingly our currency reserves drained away within weeks of making the pound convertible. This was really serious stuff.

I'm sure Darling was indulging in hyperbole when he suggested the current situation is as bad as 60 years ago. One quarter of zero growth does not turn things to how they were 60 years ago (or even to the early 90's, when we had seven consecutive quarters of negative growth - 21 months, or early 80's when we had six consecutive quarters of negative growth - 18 months).

Revised US growth figures came out on Thursday. According to the latest estimates, their growth has been as follows:

Q4 2007 -0.05% (annualised equivalent -0.2%)
Q1 2008 0.2% (annualised equivalent 0.9%)
Q" 2008 0.8% (annualised equivalent 3.3%)

So they appear to have come out of their troubles. Our cycle is lagging behind theirs, but their recovery is hopeful given their massive effect on the world economy. In September tax rebates go out to Brits, oil is lower, wheat and corn prices are lower, most householders do not need to borrow further money. There is no reason there shouldn't be a recovery. Of course disasters could still happen - the American mortgage companies, Fannie Mae and Freddie Mac may go under, but it is certain that the US government will step in and take over the liability, and life will go on.

Alistair Darling needs to be careful how he speaks. Economies run on confidence and one of the main jobs of the Chancellor of the Exchequer is to provide reassurance and confidence. It's not a co-incidence that our poll rating really took a dive after the spring budget. Voters knew there was a global crisis and were looking for staunch reassurance from government. For the first time in eleven years Labour did not provide it. Not surprisingly his ratings are almost as bad as Gordon Brown's, but unlike Brown he hasn't been the recipient of sustained personal attacks, the ratings are a perception of how he is doing at the Treasury.

You would not catch a statement like the one Darling just made from the US treasury or the French and German finance ministries. Mr Darling needs to get to grips with the fact that his primary purpose is to inspire confidence and ignorance about economic history (the 60 years comparison), and related scaremongering certainly don't inspire that.

Tory Millionaires

Reading Political Hack's piece about Caroline Spelman's misuse of taxpayers money, I fell to wondering why she felt she had to abuse her position. Because she's not poor. According to the News of the World, she's worth £1.5million. So why the desire to filch money from the public purse?

The NOTW article is interesting in other ways too. They point out that 19 of 29 of the Conservative shadow cabinet are millionaires - as they put it, if they get elected "Britain could be on the way to its wealthiest government since the mid-19th century—when the aristocracy relinquished power", 150 years ago. Wow - that's going way back to before the franchise was widened to male householders with a certain amount of savings.

For those interested, here's the list:

Lord Strathclyde, Leader of the Opposition in the House of Lords - £10 Million

Phillip Hammond, shadow chief secretary to the Treasury - £9 million

George Osborne, shadow chancellor - £4.3 million

Jeremy Hunt, Shadow Secretary for Culture, Media & Sport - £4.1 million

David Cameron, Conservative party leader - £3.2 Million

Dominic Grieve, shadow Home Secretary - £3.1 Million

Francis Maude, Shadow Chancellor of Duchy of Lancaster - £3 Million

William Hague, Shadow Foreign Secretary - £2.2 MIllion

Alan Duncan, Shadow Secretary for Business, Enterprise & Regulatory Reform - £2.1 Million

Andrew Mitchell, Shadow Secretary for International Development - £2 Million

David Willetts - £1.9 million
Theresa May - £1.7 million
Oliver Letwin - £1.5 million
Caroline Spelman - £1.5 million
Owen Paterson - £1.5 million
Cheryl Gillan - £1.4 million
Liam Fox - £1 million
Grant Shapps - £1 million
Michael Gove - £1 million

Not exactly "people like us" or "people in touch with ordinary folk", are they? No wonder one of the few concrete policies the Conservatives have is to cut inheritance tax.

Look out for other policies that will specifically help millionaires and ignore everyone else. The last time we had such a concentration of interests in the early 19th century, we got such horrors as the New Poor Act, which massively expanded brutal workhouses, and which the Times criticised at the time as a "disgrace [to] the statute-book."

Friday, August 29, 2008

Some thoughts on McCain's VP pick - he's made a mistake

Today came the stunning news that McCain picked Alaska governor Sarah Palin as his vice presidential nominee.

It was definitely a "Wow" piece of news. But once I got past the initial reaction of "hasn't he been bold" and "That was unexpected" and "she's young, she's a woman, this is an exciting pick (unlike Obama's)", my feeling is that McCain has made a mistake.

McCain is trying to win over Hillary Clinton supporters who are unenthused by Obama. If I was an American, I would definitely be in the Clinton camp. I thought she was improving as the campaign went on, I thought that she was the better candidate in terms of intellect and a demonstrable ability to go on a very fast learning curve (important for presidents as you have to be able to adapt to events) - by comparison, Obama was far more static. I thought that she was refreshingly upfront about how centrist her policies were, whereas Obama played left and then abandoned his positions - ironic in that the Clintons are supposed to be the devious ones, and Obama supposed to be above it all. She lost because of caucus results in no-hope Republican states and the crazy Dem election system.

So McCain's pick is supposed to be aimed at people like me. Only Sarah Palin is just wrong for those who care about women's rights (as all Hillary supporters do). Palin strongly supports capital punishment, is a creationist and is a fervent anti-abortionist (and is anti gay people too).

The vice president nominees in this election are unusually important in that there is a great likelihood that the elected president may die in office (Obama through assasination by KKK nutters and McCain from old age). Therefore if McCain got elected, Palin might end up as president. How would Hillary feminists feel about that? That their idol Hillary is denied the honour of becoming the first female president and this anti-abortionist with one tenth of Hillary's brains, who was a beauty-queen of all things, gets it instead? God forbid. I'd vote Obama just to deny Palin the chance. Sarah Palin just isn't in Hillary Clinton's league. It's actually an insult to women that McCain thinks we'd simply vote on gender regardless of whether the candidate is qualified to be president.

For Hillary's other constituency of working class voters, Palin brings nothing to the table. She hasn't any reputation of turning round economies or helping the poor (unlike the Clintons). Plus she's inexperienced.

So I think this is a stroke of luck for Obama, who has been struggling thus far. Yes, people like me would have preferred Mrs Clinton to have been the candidate. We think she'd have made a good VP too. We've been irritated at how much the Obama people dump on the Clintons (especially as Mrs Clinton has been the most helpful of all losing Dem nominee candidates in history). We're irritated at the whole Messiah stuff that surrounds Obama, and we're convinced that he will turn out conventional and not change-making in office.

But, elections are about choosing the least worst candidate. Obama is streets ahead of McCain on foreign policy, simply because he has no hang-ups and will view things with an objective eye (which is all you can ask of US presidents). McCain's hang-up is that he was part of the Vietnam war. America lost Vietnam. McCain lost personally too, as he ended up a POW who cracked under torture and repudiated his own country. In other words, he ended up a loser too. All his belligerence stems from this need to make up for being a loser. In a way, his psychological flaw is worse than Dubya's (which was to compete with his father by doing the opposite of everything Papa Bush did - Bush Sr hated Rumsfeld, so Dubya appoints him, Bush Sr didn't go to Baghdad, so Dubya decides to and so on). America has never elected a Vietnam veteran because of fears about their psychology.

On domestic policy, McCain has admitted that he knows nothing about economics, and there is no sign that his VP pick knows much either. Which negates Obama's inexperience. The best candidate on the economy was Mrs Clinton, but she's not on offer. You might as well roll the dice and go for Obama in these circumstances.

So despite the hammering that Obama is getting from the negative McCain ads, I think Obama will win, because the Clinton people will back him, and he has a good get-out-the-vote operation. The Labour party should watch closely, because the attacks on Obama arn't that dis-similar to the attacks on Brown (out of touch with people like you and so on). The Dems in the past have been as bad as Labour in getting out their vote. If Obama wins because he changes this aspect, then we should try it here.

Tuesday, August 26, 2008

A Look at Insolvencies

In most proper recessions, there are a large amount of insolvencies, as businesses fold due to lack of demand, or the banks withdrawing their credit lines. In 1992, a record 55,000 businesses went bust.

So given the hysteria, how do things look at present? The graph at the top shows the number of Company Liquidations in England and Wales. The Insolvency Service says that total for the second quarter of 2008 was 3560 (1324 compulsory liquidations, and 2236 voluntary liquidations). The other thing to notice from the graph is that liquidations are lower than in 2002, when the after-math of the global dot-com crash was felt. Current company liquidations are in line with the creative destruction that you find in any healthy capitalist economy. They are nowhere near the alarming rates that you find in a true recession.

What about individual insolvencies? The press has been going on and on about personal debt. Individual insolvencies were 24,553 in the second quarter of 2008 - a fall of 2.0% on the previous quarter and a decrease of 8.3% on the same period a year ago. UK bankruptcy law was changed effective 2004, and as you can see from the graph, loads of people who were labouring under debt for years took the opportunity to sort their situation out. However that backlog is cleared, and since the Northern Rock scare last year, it appears that members of the public are taking care not to accumulate too much debt and to be defensive about their finances. It's not surprising really - sites such as Moneysavingexpert sprung up two years ago precisely to help people get out of debt and financial difficulties. Perhaps the drop in personal insolvencies is because the press has been going on about the problem for so long - there can hardly be anyone in the country who hasn't taken some defensive action as a result. The population has never been better informed - which in turn makes them more resilient.

Monday, August 25, 2008

Musings on Identity

I watched "Who do you think You Are" last Wednesday - for those who didn't catch it, you can view it on the iPlayer.

The episode featured Boris Johnson, whom we all know is of mixed ancestry, Russian-Jewish on his mothers side, Turkish-English-French-German on his fathers.

But what was striking about the program was how anxious he was about this. He starts off the program assuring the viewers that he has "loads" of British ancestors. He's quite comfortable during the Turkish section of the story, he's clearly very proud of his Turkish great-grandfather. But when he learns that the de Pfeffels are German, not French, it's a bit too much for him. At one point he remarks to the camera "I hope the people of Henley will bear in mind that at least half my antecedents are actually English. I know it looks like I'm some kind of foreign toff here, which is not necessarily good PR, but at least half of my antecedents are English. English. Loads of them."

He turns out to be descended from minor German kings, and from the Hanovarians, through George II. Boris is thrilled to bits. "I have British royal ancestry" he declares. "I've always felt I was the product of newcomers to Britain, so it's totally bizarre to be told my great times eight grandfather is George II of England". In his mind this makes him legitimately British. Of course George II, being only the second Hanovarian king, is ethnically entirely German and he was born in Germany too - in other words another newcomer.

All of which throws up interesting questions of identity and highlights the differences between the Labour and Conservative parties.

There is no way a Labour politician would have been as anxious about being foreign as Boris was (and a Labour politician would have been embarassed to be descended from a king rather than thrilled). Labour has always accepted that Britain is a mixed place, not just as regards the recent immigrants from the Commonwealth and Eastern europe, or the early mix of Angles, Saxons, Jutes, celts and Vikings, but also due to the great movement of people that took place from the Renaissance up until WW1 (when passports were first introduced), during which time people literally went back and forth across Europe as they wished, and all sorts of people settled in Britain and were absorbed, including imported kings.

Conservatives however have quite a narrow view about identity. I can't help wondering whether Boris and his father adopted their caricature Englishness (cripes and piffle and all the rest of it) because they felt that as incomers they must be more British than thou.

You see this in other Conservative politicians too. Michael Portillo used to never talk about his Spanish father, and felt he had to display fierce hatred towards the EU to compensate for having a European parent (and part of the reason he lost out on becoming Tory leader was due to this foreign-ness, the other part being that Tories were suspicious of anyone with a gay past). Michael Howard adopted such a hardline attitude to immigrants in the 2005 campaign, even his own grandfather would have been sent back to the Nazis had his would-be policies been in place in the 1930's.

But perhaps Boris, Portillo and Howard felt that to get anywhere in the Conservative party while being slightly foreign requires you to deny your father three times before the cock crows.

Friday, August 22, 2008

ONS revises Q2 2008 growth to 0%

The ONS have revised down Q2 2008 growth to 0%, and Conservatives are ecstatic at the thought that the UK "may" go into recession. Before they get too orgasmic, I'd like to remind them that in 11 years of New Labour government, there has only been one quarter with zero growth (Q2 2008) and we have had no quarter with negative growth at all.

The public will only replace the government if they think the opposition can do better than Labour - i.e. the opposition need to promise to produce twelve years of consecutive growth.

But of course the Tories won't promise that, because they don't believe they can match the Labour record. After all the Tories presided over two of the worst post war recessions on record: the early eighties recession which entailed 6 consecutive quarters of negative growth (18 months) and the early 90's recession, which entailed seven consecutive quarters of negative growth (21 months, nearly three years). By contrast our record holds up very well. We also hold up well compared to all major competitors.

Do people really think that Cameron would do better, given the part he played in the early 90's? I'm sure hoards of Tories will come on here to say that Cameron had nothing to do with the early 90's recession, he was merely Lamont's tea-boy (at the age of 26!). So I'll rephrase that - do you really think that someone who was so poor at his job that he was still a tea-boy at the age of 26 could run the economy better than Labour?

For all those Tories saying they can do better - here's a challenge: Pledge to beat us and produce twelve consecutive years of growth. If you can't do that, you're all just full of hot air.

P.S. Just to give Tory fantasists a taste for the quality of Cameron's advice when he worked for Lamont - take a look at this article. Just six weeks after Black Wednesday, and the ERM debacle, Cameron was advising Lamont that the euro was the answer. Still trust his instincts or judgement? My guess he doesn't have any original thoughts at all, he just blows around in the wind appeasing whoever he needs to and adopting all manner of flaky ideas - one minute advocating the euro (which Brown's advisor Ed Balls understood wouldn't help at all, hence his advice against joining the euro and to make the BoE independent instead), the next minute sitting with Russian extremists in the Council of Europe, to appease eurosceptics in his party. In neither case did he stop and think of consequences of these decisions.

Tuesday, August 19, 2008

Cameron's confused policy on Russia

Very interesting post from Labour Matters (also in Freemania):

Happy to jet off to be photographed with the Georgian President, the Conservative leader remains silent about his Party’s close links with the United Russia party of Vladimir Putin and Dmitry Medvedev on the Council of Europe’s parliamentary assembly.

...........On the Council of Europe’s parliamentary assembly, UK Conservative Party members don’t sit with the moderate parties of the right - such as the German CDU/CSU or the French UMP - but with the more extreme right-wing groups like the Danish People’s Party, the Italian National Alliance, as well as Russia’s United Russia party, as part of the ‘European Democrat Group’.

In fact, the European Democrat Group is chaired by a United Russia member, while Cameron’s Conservatives are the honorary president (Baroness Knight); vice-chair (David Wilshire MP), political officer (Robert Walter MP) and co-treasurer (Christopher Chope MP). So while he’s talking tough for the cameras, his MPs are closely tied to the very people he’s supposedly opposed to.

For the uninitiated, Putin is currently president of the United Russia Party, and Medvedev is one of their representatives. Why are Conservatives snuggling up to extreme right-wing Russian groups like this, and shunning the German CDU and French UMP? Are they out of their tiny little minds?

Or is this about their other foreign policy issue - the EU - where they would rather sit with Russian extremists than fellow conservatives in the EU. If Cameron takes government, it looks like he will try to leave the EU and snub Western European governments, snuggle up to extremist Russian parties, while simultaneously snuggling up to the sworn enemies of the extremist Russian parties in Georgia. Got that? Looks like the next election will be about foreign policy. Do you want this idiot in charge of Britain's foreign policy.

Monday, August 18, 2008

Attitudes in America v Britain

David Smith, writing in the Sunday Times, made this observation:

After a couple of weeks in America, I have one or two observations. Americans are more concerned about the level of petrol prices than about house prices. And in general, for a country going through a more severe adjustment than here, there is far less economic gloom, including in the media. Maybe we enjoy wallowing in it while they don’t.

Maybe it is to do with differences of national temperament - or maybe it is to do with something else. The press hate Gordon Brown, and are desperate for him and the Labour government to be replaced. They also know that they and the Tories have been predicting economic doom for eleven long years and it didn't materialize. I believe that the excessive negativity and doom and gloom are a concerted effort to talk Britain into a recession. Because without "help" of this sort, the economy might do it's usual resilient thing.

Speaking of resilience - John Lewis sales have started to rise again. They attributed it to cool weather sending people into shops. But it's as likely to do with falling petrol prices making people feel they have more to spend.

Thursday, August 14, 2008

GDP Growth Among Our Competitors

Eurostat have just released the growth figures for the EU, and as always have included figures for the USA and Japan for comparison. Here's what has been happening since Q3 2007. All figures state growth per quarter:

Country Q307 Q407 Q108 Q208

Ireland 0.6 0.1 -0.2 *
Spain 0.7 0.8 0.3 0.1
France 0.7 0.4 0.4 -0.3
Germany 0.6 0.3 1.3 -0.5
Italy 0.2 -0.4 0.5 -0.3
UK 0.6 0.6 0.3 0.2
USA 1.2 0.0 0.2 0.5
Japan 0.2 0.6 0.8 -0.6

* denotes figures not available yet

As you can see the UK is holding up despite having higher interest rates than any of the countries listed (base rates in the UK are 5%, in the eurozone 4.25%, in the USA 2% and in Japan 0.5%)

On a more general point, it seems that countries with a good amount of domestic consumption are holding up, while countries who rely on exports are vulnerable to their target markets suddenly not buying. The USA has survived because of a massive cut in interest rates, plus $100bn of tax rebate cheques mailed out in the first half. The real test is how they cope now the rebates have gone.

Things that affect domestic consumption in the UK are oil and food prices and credit. Of these, oil and food should ease later in year, as drops in the prices of commodities feed through. That in turn should bring down inflation and pave the way for a rate cut.

If the UK gets through this world storm without contracting, Gordon Brown deserves a medal, as this will have been the second world storm he steered us through without contraction.

Wednesday, August 13, 2008

Wheat, Corn and SoyBeans

I just thought I'd post these graphs of wheat, corn and soybean futures (click on the graphs to enlarge - note the date on the chart isAmerican, so they've got months and days back to front). The prices of these grains are falling sharply from their peaks, which should, if sustained, bring down food prices later this year. Grains are used as cattlefeed, so it's not just the price of a loaf of bread that's affected, the price of meat moves too. Coupled with the drop in crude prices, inflation should start to drop as long as wage inflation doesn't get embedded in.

Tuesday, August 12, 2008

Busting some myths that have arisen regarding "potential" Labour leadership candidates

In these feverish times, all sorts of pundits have been touting all sorts of candidates for leadership of the Labour party. The most excited speculation concerns some of the candidates for last years deputy leadership contest - Harriet Harman, Alan Johnson and Jon Cruddas. Let's take a look at the detail of the voting round by round:

Round 1
Candidate Affiliates CLPs MPs and MEPs Total
Jon Cruddas 9.09% 5.67% 4.63% 19.39%
Harriet Harman 4.35% 8.04% 6.54% 18.93%
Alan Johnson 4.55% 5.53% 8.08% 18.16%
Hilary Benn 4.93% 7.21% 4.27% 16.40%
Peter Hain 6.64% 3.87% 4.81% 15.32%
Hazel Blears 3.77% 3% 4.99% 11.77%

Round 2

Candidate Affiliates CLPs MPs and MEPs Total
Alan Johnson 5.91% 6.35% 11.47% 23.74%
Harriet Harman 5.15% 8.80% 7.29% 21.23%
Jon Cruddas 9.64% 6.01% 4.74% 20.39%
Hilary Benn 5.56% 7.93% 4.74% 18.22%
Peter Hain 7.08% 4.24% 5.10% 16.42%

Round 3
Candidate Affiliates CLPs MPs and MEPs Total
Alan Johnson 7.81% 7.31% 12.78% 27.90%
Harriet Harman 7.12% 10.15% 8.61% 25.88%
Jon Cruddas 11.01% 6.58% 6.30% 23.89%
Hilary Benn 7.39% 9.29% 5.65% 22.33%

Round 4

Candidate Affiliates CLPs MPs and MEPs Total
Alan Johnson 10.25% 10.70% 15.39% 36.35%
Harriet Harman 9.46% 13.82% 10.29% 33.58%
Jon Cruddas 13.61% 8.81% 7.65% 30.06%

Round 5

Candidate Affiliates CLPs MPs and MEPs Total
Harriet Harman 16.18% 18.83% 15.42% 50.43%
Alan Johnson 17.15% 14.50% 17.91% 49.56%

First let's look at Cruddas. Note that the affiliates loved him. But the CLP was indifferent as was the PLP. In round 2 among the CLP he was fourth out of five, and among the PLP joint fourth. The CLP places him last in round 3. The only reason he stayed in the game so long was due to the Affiliates giving him such big share of their vote. But you can't win anything in Labour based on the Affiliates alone.

There is no reason to believe that any of this has changed. If the CLP and PLP didn't rate him for deputy then they won't for Labour leader and PM - or even deputy again.

Next let's look at Harriet Harman. The first thing to note is that the Affiliates didn't like her at all! Only Hazel Blears was rated worse by them in round 1. Harriet's support came from the CLP. And crucially, she makes a good showing among the PLP (they place her second out of six in the first round). And then she continues to pick up votes from the CLP - it wasn't just the Cruddas people who placed her second, Hain people, and Benn people did too. Among the affiliates, the Cruddas transfers split evenly between her and Johnson, and among the PLP, it was transfers from Cruddas that helped her close the gap and run Johnson close.

She won because she managed to get a near draw from the affiliates, a 4.33% win from the CLP, which cancelled Johnson's 2.49% lead among the PLP.

But how would this transfer to contesting the leadership of the Labour party? In the PLP, she got endorsements from people like Gisela Stuart, Patricia Hewitt, Ed Miliband, Denis McShane, Geoff Hoon, Alistair Darling, Douglas Alexander and Yvette Cooper. But would they really endorse her for PM? Some of those names will drop off. If she falls behind sharply among the PLP, she loses. She won't get the same level of vote from the CLP either - they were voting for a deputy to balance Gordon Brown. And the affiliates will dislike her as much as ever.

Lastly, let's look at Alan Johnson. From the first round it's clear the PLP liked him (he got 90 nominations, including David Miliband) - but the affiliates and CLP were indifferent. As described above, he lost due to the CLP not really rating him. But they may warm to him if he was up against a cooler character, say David Miliband. But then again, it depends on how hard Miliband decided to campaign. Johnson was very lazy last time and didn't really bother to tour the constituencies. But if Miliband cuddles up to hate figures like Milburn, he's stuffed. So many buts. The CLP vote is up for grabs here.

If the leadership contest was between Harman, Johnson and Miliband, then Harman would drop back among the CLP and PLP (and the affiliates never rated her anyway). Johnson would win the Affiliates. Among the PLP, Johnson might pick up some of the people Harman loses, but lose some of the people who voted for him in the deputy leadership contest. Some people excitedly think that Johnson has more backing in parliament than Miliband. But the PLP will choose whoever polls better, and the latest YouGov poll showed Miliband ahead of Johnson by some way. So if the Affiliates go for Johnson, and the PLP for Miliband, then the CLP will decide.

The CLP wasn't that thrilled with Johnson in the deputy leadership contest. There is no evidence that they are thrilled with Miliband. They are feeling tired and unenthused by the whole business and wish the MPs weren't washing dirty laundry in public. Now is the time for another much better candidate to show their hand - or for Gordon Brown to make the mother of all comebacks.

Wednesday, August 06, 2008

Crude Continues to Drop

Further to my previous post about the Baltic Dry Index, where I stated "If the Baltic Dry Index continues to fall, it indicates demand for raw materials is dropping, which means orders are slowing down. The oil price will be bound to follow", well the Baltic Dry Index has continued to drop. It's now fallen to 7869. And crude has dropped alongside it - see the graph (click to enlarge).

My feeling is that the peaks in both the Baltic Dry Index and oil were down to the race to get things ready for the Beijing Olympics. Elsewhere there was a definite slowdown in activity. The oil price drop is not only a benefit for the road user, it should have implications for gas prices if it is sustained, as gas bought from Europe is linked to oil prices. The question then becomes how soon the gas suppliers react to changes in the market prices (which is down to the regulators to keep an eye on).