Eurogeddon or Wishful Thinking ?

Telegraph :

"Suddenly, no-one wants to hold euro denominated assets of any variety, and that includes what had previously been thought the eurozone safe haven of German bunds... All of a sudden, the pound is the European default asset of choice. "

Ah yes. That must be why the Euro's collapsing against sterling. Not.

A Few Thoughts On The Euro Crisis

Just as a communist might argue that "true communism" has never been tried, dismissing the Soviet Union, China et al as flawed implementations that don't invalidate the basic model, you could argue that there's never been such a thing as "true capitalism" or "free market" outside of say the local car boot sale. To a greater or lesser degree governments have always put their oars in, special interests wielded their baleful influence - and individual capitalists done their best to establish monopolies or cartels, destroying the market.

But, at least as far as the post-war period's concerned, all that pales into insignificance compared to today's interventions. For at least the last four years, all investment decisions have turned on what governments will do. As Jonathan Weil put it three years back :

"... the clearest path to making money in the public markets is to know in advance what the government plans to do next ... and when - and then trade on it. Let there be no doubt: Plenty of people with access to such inside information are enriching themselves this way now."

Prime example in the UK - the Bank of England Pension Fund, who moved the bulk of their assets into inflation-proofed securities when they started printing money.

Today's big question - will Germany either

a) print ?
b) bail out Southern Europe ?
c) neither - at which point defaults start, absent
d) Euro-area fiscal union - with Germany running the show hands-on, because while they may trust the Irish, Dutch and Finns, they can't trust the Greeks or the Italians, and maybe even the French ?

Now either a) or b) will see a surge in global stock prices - even though it won't actually address the "structural imbalances" - a PC way of saying that the Germans are German and the Greeks are Greek. It's just kicking the can down the road for another few years - but when have the markets worried about the long term ?

c) will see a collapse of prices, the break up of the eurozone and perhaps 2008 all over again, until the realisation dawns that the sky hasn't actually fallen and that Spain, Italy and Greece are better off with their own currencies (though leaving would be seen in all of those as a national humiliation). But the "imbalances" would at least be fixed.

d) - "now this is the d you can't see, said the cat" - can you really see German civil servants and Bundesbank officials sitting in Greek government offices and out enforcing tax collection ? Not at all sure I can. If anything was likely to cause major friction 'twould be that - and I don't think the Germans want to be Europe's police and civil service. They'd just like the Greeks and Italians - well, to be more like Germans. We can all dream.

And, talking of major friction, I'm yet again impressed by the UK left - for the last 20 years we've been hearing from them how much more sensible and better-organised the Europeans are, and how the awful little Englanders just don't appreciate how much better off we'd be in a closer European embrace.

But now they're warning that if the Euro breaks up, the continent faces descent into war. I heard Richard Horton, editor of the Lancet (of "Everyone Dead in Iraq" fame) on Any Questions (in Ely) a few weeks ago. Asked about the possibility of the Greeks leaving the Euro, he launched a hysterical rant on the subject of 50,000 Jews being deported from Greece during WW2 and implied that a replay was on the cards in the event of a Greek exit. Apparently the lovely Europeans, who we should all strive to emulate, are only restrained by the EU from slaughtering each other ... looks like a late conversion to the Peter Hitchens thesis (written, admittedly, before Britannia went on crack and started working the streets) that "Britain is the only virgin in a continent of rape victims".

To be fair, the left is being given ammunition by a host of Eurocrats fearful for their jobs. I'm not at all surprised that Herman van Rumpy-Pumpy waves the grisly spectre. Where else would he get so much money and power ? But I think the Polish Finance Minister needs to take an aspirin and have a lie-down, rather than warning, as he did last Monday, that Euro breakup would lead to a European war.

Now all the way along Germany's been saying "we will do what we have to do to support the Euro" at the same time as saying "we won't print or bail out". Does not compute.

The conventional wisdom is that the Germans won't print because they're scarred by the memory of Weimar and wheelbarrows, although that took place nearly 90 years ago. Not so, according to a commenter at FT Alphaville.

"the Weimar hyperinflation is often cited as the main reason for Germany's 'obsession' with sound money. But visiting Germany frequently on business and speaking to Germans I doubt that. Most people alive today did not live through that period.

The real reason is that post WW II-Germans got used to their DM as a reliable store of value and kept on doing that with the Euro. Only 40% of Germans are home-owners, as indeed, under a stable currency renting often makes more financial sense. Germans don't invest in the stock market but prudently put their money in cash in a savings account.

Hence, the typical German family is completely unhedged against inflation, and is therefore worried about it.

For the average German who has worked and saved 20 to 30 years, it is actually a better prospect to live through a deflationary depression and have a 30% chance of being out of work as opposed to seeing his life's savings wiped out through currency debasement. That's what's driving German politics, not the Weimar memory."

In the buy now, pay never UK the chancellor can take a political decision to bail out borrowers by printing, to the detriment of savers - because borrowers massively outnumber savers. In Germany the prudent ARE the electorate.

So will Merkel print ? IMHO yes - once a big enough disaster has happened - maybe a Greek default or euro-exit. She'll remember all the promises that were made to the electorate when they lost their beloved DM - then she'll break them.

But that's predicated on the guess that she won't want to be the one bringing the Euro down. And I might be wrong (to be honest, I think that massively ripping off the responsible and sober German electorate is far more dangerous than Greece or Italy defaulting).

Any ideas ?

The Fall Of The Sparrow

I used to cross metaphorical swords with this chap some eleven years back, and noted his subsequent rise in the criminal-charitable complex.

While we disagreed vehemently, he was (for a pro-criminal lefty) mostly civil in debate.

I'm sorry to see that he seems to be in trouble for the same kind of thing that got him into trouble a dozen years ago. I guess he'd just say that society was to blame.

Cameron vs Merkel

We've seen an interesting spectacle - Chancellor Merkel of Germany lambasting the Greeks and Italians for borrowing and spending too much, and preaching austerity to them.

But now come the French, US and UK, lambasting the Germans for not printing Euros the way the US and UK printed dollars and pounds.

Cameron, representing a highly indebted country with a dreadful balance of payments and a riotous immigrant and underclass population, whose prime export is intelligent natives, will today preach profligacy to the leader of Germany, a nation with none of these problems.

"You want more IMF cash, because you're too squeamish to print? We debauched our currencies - you can damn well debauch yours! And if you don't, there'll be a global depression - and it'll all be Germany's fault!"

Numbers ...

Telegraph :

Figures from the Office for National Statistics showed that unemployment was 2.62 million in the three months to September.

The number of non-UK nationals in British employment was 2.56 million, up 147,000 from the same period year earlier.

(That's legal employment of foreign nationals. God knows what the illegal numbers are like ...)

Racist Stereotyping

Andrew Gilligan (along with every other financial commentator in the world) :

For all its pretensions of unity, Europe is made up of two very different kinds of country whose economies are not really compatible and which were never ready to share a currency at all. Greece is the most extreme example of the first kind – profligate Mediterranean places where productivity is low and inefficiency rife. Germany is the opposite – northern, thrifty and responsible, the EU’s cash cow.

Isn't all this stuff about the hardy Northerners and the lazy, corrupt Southerners just the worst sort of racist stereotyping?

Mr Gilligan, I thought you'd worked for the BBC. Surely they must have taught you that we are all exactly the same, and that's why we should celebrate our difference?

Economic Illiteracy - Media Edition

Great news !

"British retail sales grew more than expected in September after a surprise increase in sales of laptops and video games, the Office for National Statistics said on Thursday."

By strange chance, Laban bought a new laptop in September - and his youngest son also got a new games console as a reward for better-than-expected GCSE results, after a paternal promise the previous autumn which at the time seemed unlikely to ever need redeeming. Fair play though - he got the grades. Perhaps that made the sales difference ...

How good that must have been for British laptop and video console manufacturers !



Terrible news !

"In a blow to the government's aspirations for exports to lead a recovery, the trade gap – the difference between imports and exports – widened to almost £10bn in September, prompting warnings that already lacklustre economic growth for the third quarter will be downgraded."

Perhaps one day someone will put two and two together and recognise that, for as long as we continue not to make anything, strong retail sales are part of the problem, not part of a solution.

A Dangerous County

Guardian obituary (via PA) of Jimmy Savile :

"His success was founded on a totally overweening belief in his own abilities and a tremendous energy, which took him from the Yorkshire minefields to radio and TV stardom."

Change For Change's Sake

They've trashed Google News. Now those clever-clogs at Mountain View seem to have removed the cache results from Google search.

If it ain't broke, don't fix it. Perhaps they'll notice the increased number of hits here.

Google Search was an order of magnitude better than the competition around the late 1990s - I remember moving from Altavista. They got big as the punter looked and liked. But, as they came to dominate, the competition vanished. And now the punter's going to get what Google like. Where's the 'Classic Search' option in Preferences ? There ain't one.

UPDATE - you have to follow the arrow on the RHS of each result, which gives a preview of the page. There's a cache link there. As I said, where's the Classic Search option ? It was fine as it was.

Now That's What I Call A Vision Statement

New CEO of Orange Broadband :

"Our objective is to get to a point where we are no longer ashamed of what we are doing to our customers"

Guardian Cognitive Dissonance Alert

Why it is wrong to make these people leave their illegally-occupied homes.

Why it is right to make these people leave their legally-occupied homes.

Mervflation

RPI inflation hits 5.6%.

And the Bank of England, whose mandate is to keep inflation at no more than 2%, are printing money - because otherwise inflation will be really really low ! But don't worry - it'll be back to 2% soon - Mervyn King says so.

Economist Shaun Richards :

I have looked back at the Bank of England’s past inflation forecasts for today to see how they compare with a level of CPI inflation of 5.2%.

November 2009 1.8%

February 2010 1%

May 2010 1.5%

August 2010 1.5%

February 2011 2%

These are estimates from the mid-range of its fan charts but as you can see any minor error in staring at the chart is dwarfed by the scale of the forecasting incompetence exhibited by the Bank of England. Apparently we are supposed to believe yet again that inflation will fall below target and only this month we required a further £75 billion of Quantitative Easing to stop a deflationary nightmare!

He must be really intelligent

"Liam Fox broke ministerial code"

To be able to do that AND run a major department is truly impressive. The people at Bletchley Park in the war were brilliant, but they were usually full time codebreakers. Fair play to him.

France Deserved It

They scored more points ... still, our loss is great and our grief cannot be mended.

Laban, 2 days ago :

My worry is the kicking. We have no Jenkins or Thorburn, Parks or Paterson - Leigh Halfpenny's the nearest we've got and I wish he'd take more kicks. When Wales beat France in the U20 quarter finals two years ago his kicking was excellent.

Say what you like about Henson - arrogant and unpleasant is what I say - he seems nerveless when faced with a pressure kick.

Poor Hook. Like Gavin Hastings, those kicks will hang round the neck like the proverbial albatross. And Hastings only missed one ! It must feel even worse when you know that the rest of your colleagues stepped up to the plate magnificently after the sending off. Mind, Phillips could have tried to get under the posts a bit more - shades of Martyn Williams against Fiji four years back. Why didn't he devote a bit of energy to getting a yard further in, instead of waving in celebration? He knew what our kicking was like!

A great shame, especially as Wales are probably one of the top two teams of the tournament. For a team that would have graced the final to miss out like that is a real pity. But they had it in their own hands to win - even with 14 men.

Good luck to the French - they'll need it. I bet the Aussies and All Blacks are breathing a sigh of relief - and rubbing their hands.

They'll Be After Revenge ...

Wales v France in the U20 World Championship 2008 (they were beaten 31-6 by the Baby Blacks in the semis) ... in a remarkable finish they keep the ball alive to win the game on 86 minutes after being awarded a penalty try with a few minutes left. The French aren't too pleased... lots of now-familiar faces on the field.

Sock Puppets

Surely the Guardian sub-editors were taking the mick when they fronted a Cif piece by republican sympathiser Ronan Bennett with this headline :

All of Ireland could use what Martin McGuinness gave the North

As someone commented - "what, bullets ?".



I was struck, I know not why, by this comment, from "josephv1", who'd soon followed up with several more comments :

As a Northern Irish Presbyterian, I have no problem with Mr McGuinness as President. He rules us here in the North already. Increasing numbers of my community are OK with the man - he's good in government and times have moved on. We've moved on in Ulster. Time you guys did as well across the water ..

Seemed too good to be true - this Prod who was not swallowing the bitter pill of shared republican government but positively rejoicing in it. A quick look at the posting history of this Presbyterian named Joseph (not, unless I mistake, a very popular name among Ulster Protestants) produced this mild comment from Laban :

"Josephv1 should really expand his posting interests. A self-declared Ulster Presbyterian whose entire Guardian posting history consists of comments on the evil of the British state is a curiously unconvincing online persona."

It was deleted (Ronan Bennett's paramour is Georgina Henry, editor of Guardian Online).

Laban, nothing loth :

Indeed, the more I look at joseph's entire output ...

18th June - "being from an army family myself", 9 comments on Bloody Sunday.

20th of June - "There was huge support for Irish Repubicanism across Northern Ireland, and beyond" - 3 posts on the Saville Inquiry

The guy who opened his account with 9 comments on Bloody Sunday has a 5-week hiatus, then on August 2 "And before any of the bitter old tub thumpers, armchair generals and twisted moralisers on here accuse me of being some kind of ungrateful leftist traitor, giving succour to the enemy, I'll have you know I come from a long military lineage ...The plantation of Ulster served as a blueprint for later colonial expansion in the W Indies ... the British establishment, and much of the population, cannot see that it's wrong to kill civilians.." - 16 comments on "Wikileaks and British Lies in Ireland" - the guy's on fire. Odd then, that such an enthusiastic commenter has nothing to say for 9 more weeks... before unleashing a barrage of posts on this thread. Most odd.

I've been hearing for years about the sophistication of the Republican political wing, and I guess the Guardian's giving space to Ronan Bennett testifies to that. But this is a very poor standard of sock-puppetry.

Deleted.

"josephv1" really is a remarkable poster - an Ulster Presbyterian "from a long military lineage" who only wakes up to post on CiF when the evils of the Brits or the goodness of Sinn Fein are being discussed, who posts furiously on the subject, regurgitating republican mantras, (13 posts so far on the Bennett thread) then goes back to sleep for weeks or months until another suitable thread arrives, and he wakes once more like Drake in his hammock. And he only posts on the evils of the Brits. There's a couple of other "as a xxxx, I love Martin McGuinness" posters, one "RobinPercival" and one "Phud", but a look at their posting histories suggests that they at least have opinions on subjects outside of the evil Brits and their usurpation of the Four Green Fields. If they're sock puppets, someone's at least making an attempt to give them what Smiley would call a "legend". Not so for our joe. He's only got one specialist subject.

Keeping to character, joe defends himself against Laban's innuendo, Laban fires back between deletions :

"I come from an army family and grandfather was a lecturer at Sandhurst. Or do you demand blind allegiance at all times?"

Ah. I think we call this "the Johann Hari Technique".

I'm sorry, "joseph" - I would like to debate the issue with you, but as you may have noticed, my posts are being removed as fast as they go up. Sock-puppetry, in the Guardian world, is something those evil American Republicans do, not noble Irish ones.

Maybe we can cross keyboards again - in a couple of months, when you next post.

Mind, he may well come "from an army family". I'm just not at all sure that it's the British Army.


UPDATE - Interesting. The moderators have deleted all the most-approved comments, which unsurprisingly weren't mine but were of the "Martin McGuinness ran an organisation responsible for murdering thousands of people" variety. Apparently that's a 'hate fact' and an unacceptable statement to air in the Guardian.

I Prophesy ...

Laban, last night :

I don't know why anyone's discussing this game, which pales beside the titanic encounter some two hours earlier.

Game 1 - two teams in great form and closely matched. Frightens me to think about it. A tragedy that one team must lose.

Game 2 - one team that's "good enough", one team having a 'mare of a tournament. Unless the frogs can come out of the blocks and get ten points up very early, England should win and a couple of French be sent off. A tragedy that one team must win.

Well, the Frogs did come out of the blocks - although if England had scored just before half time, rather than dropping the ball twice, I still think they'd have won. As for the Welsh - well, the first-half pace of that game was unbelievable. Ireland believed they could break them as they'd broken Australia, choosing to go for the corner with kickable penalties. A reasonable call but as it turned out a wrong one. But few teams could have survived that Irish first-half onslaught and only conceded three points - that half was scary to watch in its pace and intensity. Along with Shaun Edwards, whose work on the defence has worked wonders, the Welsh fitness coaches deserve great credit. The missed Irish tackles when Jonathan Davies scored looked like the work of tired men, magnificent though Ireland were. Wales were still putting in a huge workrate up to the whistle.

Well, what a game. Now glory awaits.

On current form, Wales must be favourites. But you can never write off the French in a World Cup. Ask New Zealand. Ask them again.


UPDATE - I really ought to mention Scotland. Best World Cup performances I've seen from them since when - 1991 ? Should have beaten both Argentina and England, played some fine rugby. Just needed a line-breaker or two - without tries a team won't go that far.

Wales have the other problem - they've not had a truly reliable kicker since the days of Thorburn and Jenkins. A Chris Paterson or a Dan Parks - Scotland are well off in that department. If the Welsh defence continues to prove robust, it could be that kicks would decide.

And the form man there is New Zealand's Piri Wipu. 7 out of 8 today ain't bad.

There's always a chance on current form that the cup could be decided by the ref. Bryce Lawrence was not very good today - it takes a lot to get Laban supporting SA, but right up to the end, when he ignored Aussie tackling round the neck right in front of him (and in front of the posts) a lot of Oz transgression went unpunished. I hope Wales have studied all the refs well - there seems to be a big difference in interpretation between Southern and Northern refs regarding when the tackler should release, and when the tacklee should release the ball. Fair play to the Aussies though - 17% possession and they won ! Almost unheard of.

Shameless

"The deterioration in the outlook has made it more likely that inflation will undershoot the 2% target in the medium term"

Mervyn King is shameless. Absolutely shameless. But only someone sure of his political backing could come out with such barefaced lies. He knows George "printing money is the last resort of desperate governments" Osborne is on board.

So the moral hazard of bailing out the banks - not once, but soon twice - is paralleled by the moral hazard of robbing the prudent and pensioners. It's a good job I had no illusions to lose about the Tories - and, as I feared, George Osborne's few sensible ideas before the election were soon forgotten after it.



Labour, 2008. QE1 announced. Mervyn King says there won’t be inflation because of the ‘output gap’ – all those factories running two shifts when they could be running three. BoE Pension Fund moves all its assets into inflation-proofed bonds.

Sterling devalues by getting on for 30% (and the printed money goes into share and commodity prices). This raises inflation dramatically, because most of what we consume, especially commodities, is imported – those factories were non-existent divisions on the BoE map board. Wages are static, because mass immigration means it’s a buyers market for labour*.

With prices rising and wages static, the only way to keep household consumption up is to send the wife out to work or spend on credit. But the wife’s been at work since 1989 – it was the only way you could afford the mortgage – and who’s going to increase their personal debts in this economic climate ?

So consumption falls. Working people are getting poorer at around 5% a year. There’s a small increase in manufacturing for export, but the balance of payments is still massively negative. Retailers suffer, the economy flat-lines.

OMG. The economy is not recovering ! Inexplicable !

Conservative, 2011. QE2 announced. King, abandoning reality completely, says it’s because his magic crystal ball says inflation is going to fall dramatically. Sterling devalues (it’s dropped 10c against the dollar in a couple of days). This raises inflation again, because most of what we consume, especially commodities, is imported.

Wages are still static, because mass immigration is still at near-record levels despite the crisis.

So consumption falls again, as it must.

OMG. The economy is not recovering ! Inexplicable ! Time for QE3 !

Rinse and repeat until UK real wages are at Chinese levels and pensioners are self-immolating in Parliament Square. Where's Fernand Bonnier de La Chapelle when we need him ?







* Marx - "The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it"

Potemkin School

History teaching has moved on from all those Kings and Queens, battles and dates, rote learning* etc. Now, as somebody said, learning is skills-based, not facts-based - students are 'taught to learn' and become self-powered, self-motivated learners, 'accessing and evaluating a range of sources' etc etc.

One of the ways in which they play at being historians is the page of sources - where children are given half a dozen carefully selected paragraphs from half a dozen carefully selected sources, and invited on the basis of same to pronounce on whether the Tommies of World War One really were lions led by donkeys.

My daughter was presented last week with a photograph of a dingy nineteenth-century street in Liverpool (or London - I forget)** , and asked for homework to pronounce on what it told her about poverty in Victorian Britain. A long and hopefully not unfruitful debate followed - during which she suggested that the photographer may have been looking for the worst street, to make a political point, and Laban pointed out that it could also work the other way round. A Government photographer, for example, may be looking for the best working class housing and the rosiest children to snap. I mentioned the idea of the Potemkin village, where artifice may produce a misleading impression.

Now in my daughter's school, there's a special programme for the bad and the unfortunate - the disruptive and nasty kids as well as those with learning difficulties (I fail to see why the latter should be lumped with the former, but it seems to be the way in "special schools" as well). It's called something like the K2 Programme, and the kids are 'the K2 kids'.

Back to Potemkin.

"Just consider", I said, "when the OFSTED inspectors are in your class, whose workbooks are out on display, and who does the teacher ask questions of ? Your bunch, or one of the K2 kids?"

"They can't ask them. When the inspectors come, all the K2 kids get sent on coach trips !"










* (except it hasn't - because the exams are now marked by temporary staff, rather than by people who know the subject. These temps don't have the knowledge to review all-round competence in a subject - instead they look for the "key phrases" which earn the marks. A semi-literate answer with the key words or phrases will earn more marks than a great sentence or paragraph which doesn't include the key words. Now the children HAVE to rote-learn these key words, and we've got the worst of both worlds).


** it bore a remarkable resemblance to the street in The King's Speech which was supposedly the 1930s home of the Aussie speech therapist, but looked straight out of Dickens.

The Spirit of Prophecy

Commenter Ando at FT Alphaville, 20 months back, after QE1 :

Dodge | February 18 1:09pm |

| Options

The BofE will surely have to come up with a better excuse for another dose of QE. They can't say "we're doing more QE because the Government has to borrow so much money", although perhaps that might be more honest...

Ando | February 18 1:18pm

| Options

No, they'll say "the recovery is faltering and the economic situation worse than we thought, so more QE is required to safeguard recovery".

What they won't say is "we used QE to defer enormous amounts of economic pain and it also helpfully assisted the government in financing the deficit, but the trade-off is that all that deferred pain will descend like the wrath of god if we stop, because none of our structural problems, such as an unaffordable public sector and levels of household leverage, have been tackled, so we'll keep trying to defer the pain in the hope things get better on their own somehow. But they won't."

At least Japan had/has household savings to finance themselves, even if it is horrendously circular, and an export-led economy. We're stuffed.

The economy's been fuelled for the last 30 years by easy credit and the associated debt, plus the mass transfer of women into the labour force (as shown in this graphic - I have no doubt the US and British experiences are similar). We're running out of women to transfer (and those we import prefer raising children), and the debt expansion, shock horror, couldn't be sustained indefinitely. Sterling's devalued 30% and wages are static.

Yet apparently it's an absolute disaster that there's no growth. Why aren't we getting "back to normal" ?

Because the "normal" of the last 30 years = debt-fuelled ? And the only people interested in taking on more debt are those who can borrow at 0.5% from the BoE (i.e not me or thee ?).

The crunch could have been very deep, unpleasant, and short - as in Iceland. Instead, it's going to be drawn out over a decade or more, inflationary, and living standards will be continually squeezed.