At the End of the Day

I do try in these pieces to avoid ending the day on a sour note. In this case, I fear a merciless piss-take is the only option open to me….but the bitterness will still peek through.

If you were trying to find a group to defend, I doubt if many people would choose the UK’s ragtag community known (for some reason) as Travellers. But if you were were hell-bent on such a lost cause, I’d be staggered if you then chose Vanessa Redgrave as your cheerleader. One could call such a plan the incomprehensible being hired to defend the indefensible.

Let’s take each element in turn.

Gypsy communities have been making a nuisance of themselves for decades in Britain. I’ve come into contact with them three times, and in each case burglary, theft from oil tanks, and varietal friction with the indigenous community have been the result. Having rebranded themselves as ‘Travellers’, the choice of collective noun is itself steeped in ironic hypocrisy: far from wanting to travel, most of these people appear to be determined to settle…and become leeches upon those unfortunate enough to find them as neighbours.

The most recent media event Travellers have created concerns the dispute with Basildon Council about a post-build planning permission. Being very naughty indeed, Basildon refuses to recognise an illegal build clearly designed to take advantage of mad New Labour pc ideas about the rainbow of multiculturalism…aka, owning land – and then using a hastily built khazi to steal building rights on it from the community. I recognise this tactic only too well: as I do the tales of local people being threatened into silence.

Once upon a time, real gypsies worked in fairgrounds and became travelling entertainers. I remember fairs employing such people when I was a kid. They had a mysterious, curly-haired, earring-sporting exotic air to them – but little in the way of a threatening nature. All that changed when the fairs and circuses lost out to cinema and the telly during the 1960s. Since then, soi-disant travellers have become adept at exploiting the insanity of extreme multiculturalism….and the increasingly stretched tolerance of the British.

This morning I watched a BBCNews channel slot about the case. Invited to explain why Basildon’s final decision to evict the gypsies was a heinous crime against human rights and worthy of a war crimes tribunal in the the Hague, a central-casting agitprop pillock spent ten minutes of precious airtime answering searching questions with unconnected answers.

So, the anchor asked, given that 99.9% of the local community would like these Travellers to travel elsewhere, what did they have to complain about? Travellers have been given a raw deal by local authorities through the centuries, the calm dissembler answered.

So, the anchor asked in turn, what do you say to the evidence given of nakedly ignoring planning rules, casual crime, and threats that have accompanied the gypsies’ stay in Basildon? All such cases involving bona fide travellers can be traced back to bigotry and the sort of racial prejudice this country is supposed to oppose, the propagandist snided.

What, one wonders, is a bona fide traveller?

Anyway, enter the adorable Vanessa Redgrave. A luvvie, a rich upper middle class woman who – aside from the carefully negotiated luxury caravan on set – has never seen the inside of the travelling life.

Let me relate a brief anecdote about Ms Redgrave. Returning home to West London seven years ago, I walked past Vanessa shaking hands and saying goodbye to a group of dumpy left-wing Wimmin who were clearly in awe of her. Turning over quietly at the kerbside was an enormous grey Bentley, and as I passed the group, Vanessa Redgrave said to this adoring knot of activists, “Can I give any of you a lift home?”

I laughed out loud, my mirth attracting a glance of pure vitriol from the famous actress. But the episode sort of sums up what she is about: interference in the lives of those she cannot really help, doesn’t understand, but nevertheless wants to use as an example of why the life that has been of such benefit to her is appallingly evil, and must be wiped from history.

Today I also watched as Redgrave wittered on to hordes of scribblers and snappers about how Basildon Council had behaved disgracefully from start to finish. So disgracefully, in fact, that it had served the needs and wishes of its constituents against those of interlopers with no loyalty to the community beyond what it could scrounge off the inhabitants.

The Redgrave dynasty is similar to that of Harriet Harman’s forebears, the Longfords: always on the wrong side, always unable to analyse the facts in a balanced manner, and forever convinced that they are right – while the rest of us poor pygmies are deluded by vicious media determined to do down anyone out of the ordinary.

No motive for that media persecution is ever produced. But one thing really is for sure: only Heaven can help anyone in a Socialist State who dares to be out of the ordinary.

CRASH 2: Division, greed & sub-prime sovereigns are still the norm.

The evidence that the asylum inmates are on the roof is as strong as ever

Rather like their equivalents in the EU, US Federal Reserve officials are more deeply divided then they’ve ever been about how to get their economy back on track.  Transcripts of the most recent discussions were released yesterday, and the spectrum of opinion seems to go all the way from full-on QE via no QE to ringing up God with a view to further guidance.

But as the Euro-American axis of poo seeps out of its gilded cage towards the Big Fan prior to ignition, twenty-five of the best-paid chief executive officers in the U.S. had little or no motivation to consider the West’s problem in more depth. This is because they earned more in salary and other compensation in 2010 than their companies’ federal income tax expenses. Now that’s a shedload of money, and not conducive to concentrating the mind. This news reaches us in a report from the Institute for Policy Studies, a Washington-based nonprofit group, which surveyed 100 publicly traded U.S. corporations with the highest-paid CEOs.

It found that companies whose CEOs’ compensation exceeded reported tax expense in 2010 had average global profits of $1.9 billion. Now: do I care if the IPS has traditionally been a tad Kennedy Democrat rather than Tea Party in its outlook? Not really, because – as in the case of Newscorp depravity – facts are facts. And facts raise ethical questions like “Should you really pay your CEO more than you pay for the privilege of living in what is still the best ordered and richest, safest society on the planet?”

It might even raise the question, is your selfishness  helping to downgrade the US credit rating? Or was it really those wicked ratings agencies all the time? Well, Standard & Poor’s is giving a higher rating to securities backed by subprime home loans – the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns to the U.S. government.

What are we supposed to make of that? The possibilities are more terrifying than endless, but thus far in 2011, S&P has awarded AAAs to more than $36 billion of securities in America. Equally mind-boggling is that these loaded guns were created by bankers who continue to gather thousands of loans, bundle them into bonds of varying risk…..and then pay ratings firms a fee to assign credit rankings. Pretty much as they did in the fat years leading up to the near-disaster of 2008.

This article was brought to you by Slog Spot the Ball Random Bollocks, a wholly-owned subsidiary of  Bollockslog Enterprises. In case you missed it, the conclusion I draw from the content is that the authorities are all over the place, business is engaged in an orgy of blinkered greed, ratings agencies can’t be trusted, and I’d rather invest in the Venusian Klop than the American Dollar. But I appear to be in something of a minority.

EXCLUSIVE: PLOT TO ISOLATE MERKEL FALLS APART AS EU ELITE REGAIN CONTROL

Olli explains why everything will be alright.

Euroband group fails to destabilise German leader

A strongly pro-eurobond EU faction, helped by some key banking figures, has been working overtime – via diplomacy and in the media – to isolate Angela Merkel, The Slog has been told. The strategy is to dilute her intransigence on the question of eurobonds – without which, the plotters feel, the eurozone will fail. But the eurozone Establishment has moved swiftly to crush the rebellion.

Immediately after the last Sarkozy-Merkel summit (says a reliable Brussels source) senior members of a pro-eurobond elite met, in the afternoon of 18th August, to discuss what they regard as the implacable opposition of German Chancellor Angela Merkel to the concept of a eurobond to create several responsibility for eurozone debt. Over the following weekend they outlined a strategy to persuade Frau Merkel to soften her attitude. During last week, an outline of the programme was shown to at least two European leaders. European sources hint that Jose Manuel Durao Barroso, the Portuguese EU President, was aware of the moves against the German leader, and actively supported their aim. The position (if any) of Herman Van Rompuy is unclear.

In the brief period since, a wave of articles has appeared in the press, focusing on Merkel’s weak domestic position and arguing that she is putting German considerations before the EU. In turn, several pieces – in titles as various as the Financial Times and the Wall Street Journal – have reiterated the case for a eurobond, in every case suggesting that without such an approach, the markets will never regain confidence in the common currency. This was in marked contrast to the previous majority view that now is the wrong time to introduce such bonds.

Like most things EU, however, the plan is half-baked, and has been executed in a kack-handed manner.

“Merkel is only in a weak German position if she goes completely native on EU bailouts,” said one German source yesterday. “She will play to the gallery with German voters and, if anything, the hardening of voter attitudes will act directly against any eurobond. I find it fascinating, if it is true, that there are people in Brussels, and banking, so desperate for a eurobond. It will come, but not now”.

Parisian contacts also suggested last night that Nicolas Sarkozy will continue to support Frau Merkel come what may. “It’s not in his interests to do otherwise,” claimed one well-placed source, “he is desperate to isolate French banks from the contagion. Having been appraised now of how bad the situation is here, Sarkozy would not back a eurobond at the moment. Attaching himself to Merkel’s apron strings is his only hope”.

Meanwhile, the Establishment has already hit back powerfully. Yesterday, Commissioner Olli Rehn made the official position clear to a senior gathering in Brussels:

“…..there are currently rather high expectations on how eurobonds could help solve the debt crisis by pooling the debt issuance of euro-area member states. However, it is clear that eurobonds, in whatever form they were to be introduced, would have to be accompanied by a substantially reinforced fiscal surveillance and policy coordination as an essential counterpart, so as to avoid moral hazard and ensure sustainable public finances. This would have unavoidable implications for fiscal sovereignty, which calls for a substantive debate in euro area member states to see if they would be ready to accept it.”

ECB President Jean-Claude Trichet was also quick to rubbish the eurobond as a short-term solution, continuing to maintain – despite a mountain of evidence to the contrary – that the euro is strong, the banks are well-capitalised, and so a eurobond will not be needed.

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Once again, of course, this very clear EU elite denial – unique in that it denies not just the solution but also the existence of a problem in the first place – demonstrates the complete isolation of UK Chancellor George Osborne – a man who has hitched his wagon to eurobonds in recent weeks. But above all, the situation in the EU as of right now demonstrates what The Slog has always felt: when push comes to shove, the individual member States do not love the euro enough to give huge dollops of welfare to those who have overspent unwisely….overspent, lest we forget, the cheap money they were given equally unwisely by private lenders and the ECB in the first place.

National selfishness will prevail. An excellent example of this at present is the sudden demand for collateral in return for Greek bailout 2. The Finns are effectively demanding the next stage of help be a loan secured against assets. As these are the same assets Greece has to sell just to survive, it’s hard to see how that one is going to work.

The Finns and the Greeks started off by working out a side deal, under which Athens would deposit a chunk of cash in an escrow account for Finland to ensure Helsinki’s support for the bailout. That quickly fell apart, because it was an insane idea,  Germany opposed it, and other eurozone nations, including Austria and the Netherlands, understandably demanded the same privilege as Finland. The best part of a dozen EU finance ministries are still squabbling over what to do.

Those of us in regular touch with the markets know exactly how this is playing: very, very badly. When Trichet says the Euro is “a sound currency” because its value is holding up, he is being invidious: his own bank (with US and Chinese help) is buying euros to hold that position. It’s not the price of the euro that’s at issue here: it’s the behaviour of the clowns reputed to be in charge of eurozone finances. From the outside, they look to be exactly what they are – a continent of hagglers, loafers, bureaucrats and self-interested politicians who are not only incapable of concerted action: they are hopelessly vague on what the action should be.

We should all keep a close watch on how the German electorate behaves in the coming days: a week tomorrow, there is the crucial vote to support Greek bailout 2. This (see above) is already unravelling: if the German Parliament rejects it, the euro is dead in the water.

 

Per adua, ad astra

I took this shot at 11.30 am today (Tuesday 3oth August 2011) in South-West France. It shows an amazing tangle of vapour trails heading south to north and East to West across a blue Autumn sky. And it traces planes full of holidaymakers returning home to a million or more desks in North Western Europe and the Eastern United States.

By the beginning of next week, stock market volumes will be back to normal and vacations will be a distant memory. The former travellers on these flights will be dealing with the awful reality of unrepayable debt, disappointing output figures, falling stock prices and rising inflation.

It was an amazing sight. At one and the same time a tapestry of technological achievement and human wealth, alongside the desire of all of us to get away from it all…whatever this ‘it’ might be.

But in the end, there is no escape. These white lines left in the sky are arrows pointing towards the final denouement of a Great Battle: the final showdown between the mad minority and The People.

At the End of the Day

Sidney the squirrel goes gathering walnuts

It’s damn near perfect down here in Let et Garonne at the moment. Over the last week, the sun has changed from burning intensity to a gentle heat that makes for easy gardening, and a nut-brown edge to an ageing Rosbif’s tan. Leaves are busy working their way through the colour spectrum from full green via bright yellow to pastel rust, and the sunflowers are drooping their heads towards the Sungod.

Sunflowers aren’t all big and yellow and photogenic for long: within a fortnight, they look for all the world like a football crowd of old blokes – heads bowed, bored by the game, but hanging in there in the hope of a goal. Our neighbour Lauren has already harvested his maize, and dumped this year’s mountain of ordure on the soil in readiness for ploughing in later. For a brief few weeks, our entrance path will be free of rotting cow dung; after which, the process will start all over again.

Now is the summer of our fat content made worse by the Autumn arrival of walnuts…with that fresh, slightly damp feel the very first kernels have as they start to drop from the trees. And as the glut becomes predictably unmanageable, they are added to warming, early-winter soups containing pumpkin and other scrumptious things. Except that, if Sidney the Squirrel has his way, he and Mrs Squirrel will be the only beneficiaries of this year’s crop.

When we had the new slate roof fitted last year, Sid was confused. Having spent years scampering up and down chestnut tiles with plenty of grip, the poor chap slid this way and that up and down smooth Spanish slate. But having had time to think about it, he now approaches matters with more cunning, and less use of the roof itself. The little scamp has taken to clambering up our north-facing stone wall, and then making the small leap from gutter to branch. So now I’m back to finding empty green jackets or – even more frustrating – rejected nuts that Sidney thinks sub-standard.

And he’s right, the bugger. I’ve watched him at his skilled quality control, and it seems to me he uses weight as the criterion. He gets the green casing off in about 0.02 seconds (it takes me a minute at least) and then – literally – uses his claws as scales while he judges whether there’s anything worth eating inside. So for much of the time, I’m picking up Sid’s tossed-away nut-free shells, thinking how good they’re going to taste later. Thus I too have been reduced to sussing out the weight. Over time, I’ve become quite good at it. I could make it to sophomore squirrel any year soon.

We don’t see much of Mrs S. She has a rather less bushy and showy tail than her partner, although she’s a little bigger than him. We don’t know her name: Jan wants her to be called Sybil, but that’s only because she likes the idea of sibilant alliteration going together with sweet little furry things. I’d quite like Sid’s missus to be a Doris – after the great Private Eye couple, Sid and Doris Bonkers, fanatical supporters of Neasden FC. But naming wild animals is something of a hit and miss process. For years we had Archibald the pigeon, a regular visitor to our home near Lyme Regis on his way back to his whippet-racing owners in Sunderland. And if you want to know how we know all this detail, as Alistair Campbell is wont to remark, “I make it all up”.

CRASH 2: Next time, I recommend we keep the bankers in the attic.

Up the wooden stairs to Bankington

This morning I posted about eurobanks lying to the auditors about their degree of exposure to ClubMed toxic debt. The letter sent by the IASB to the Sprouts (Which I’ve now read in more detail) contains a number of classic euphemisms, my favourite of which is ‘accounts chiefly remarkable for the inconsistency of reporting criteria’. How we laughed.

Now this morning from the US comes a loan sector report from Experian Automotive, a subsidiary of credit bureau and research group Experian Plc. It shows that lenders providing loans for car purchases have reverted pretty smartly to the strategy of lending to folks who probably won’t pay them back: as of last week, the proportion of car loans made to subprime borrowers rose to 40.8% – or 2 in 5 to you and me. (It hit 46.2% just before the 2008 fiasco).

“They need to make their loan books look good,” said one experienced old hand in the sector, who didn’t want to be named and (I’m afraid) failed to explain to me why or how a toxic loan book could look ‘good’. Perhaps nearer the mark as an explanation is the rapid return of sales motivation through targets. “That will never return,” said a middle-ranking personal loans agent in late 2009. Hmm.

Just so we’re clear as to how life mirrors blog gags by the way, last night’s Slogpost about blame apportionment was made flesh this morning when the Telegraph ran a piece showing that around 30-35% of the UK’s slump could be put down directly to banking incompetence, insanity, incontinence, insubordination, inane stupidity, and lots of other words beginning with ‘in’. Also this morning, the FSA reported that a whopping £215Million was paid out by UK financial institutions to customers mis-sold assurance products.

But the UK banking industry is still fighting a rearguard action against the ring-fencing of retail banking arms. And bankers generally remain implacably opposed to regulation….which, let’s face it, is all they need to be, because their opposition will be enough to have Cameron on his back and wagging his tail.

A regulatory system is a set of rules for lowlife who don’t know how to behave. Were they decent citizens, bankers would not need to be regulated. But as we have seen for over a decade now throughout the Western world, banks lie, cheat, steal, embezzle, exaggerate, underplay, bribe, threaten, blackmail and break whole nations with their overpriced, childish, perverted paper and sleazily offered advice.

But heh, nobody’s perfect.

CRASH 2: EUROBANKS LYING ABOUT GREEK EXPOSURE SAY EUROPEAN AUDIT CHIEFS

Otherwise, all normal: EU doing nothing, markets rising.

Starting no doubt as they mean to go on, the European banks exposed to the coming Greek insolvency have been underestimating how badly it will hit them – or so says the international auditors’ union, the IASB. As banks have never told the truth before, it’s a tad optimistic to expect them to start now when their backs are against the wall.

In fact, precisely the same can be said of politicos when facing the possibility of ejection from power. So we shouldn’t be surprised that Frau Merkel said this yesterday:

“Many are worried, but they don’t need to be because the currency is stable. It’s our aim to come out of this stronger than we went into it, as we did during the banking crisis. I said that in 2009, and look at where the economy is in 2011. This can be achieved again.”

Yes Geli dear, but as every Enron investor could attest, the past is no guide to the future. And your economy just slowed by half. And the euro is stable in the same way that rice pudding has the consistency of reinforced concrete.

So it’s good to see that at the MEP level, our representatives are on the ball. During yesterday’s European Parliament session about the eurozone debt crisis, Jean-Charles Juncker, the president of the Eurogroup, allegedly told his audience, “We shouldn’t believe the markets”. His reward for this encouragement for everyone to stick fingers in their ears was, I’m reliably informed, a standing ovation.

In this confident mood, the EU’s senior officials all rejected Christine Lagarde’s call for banking recapitalisation. While it was a daft idea anyway (it’s not what they need right now) it’s been rejected because of Not Invented Here syndrome: in a general sense, her observation that the eurobanks haven’t got enough money is a 180 degree U-turn from three months ago….but it is obviously true.

Buoyed in turn by this steely determination to ignore and reject, the FTSE leapt 3% in early trading. Two sources on the London markets seemed almost embarrassed as they told The Slog that good US consumer spending data and the desperate Greek bank merger had ‘allayed fears’ of a euro debt crisis.

Morals of this piece: (1) The banks are lying to Brussels. (2) Merkel is lying to the German electorate. (3) The EU still sees the entire mess as a plot cooked up by the markets. (4) EU officials are lying about the cashflow condition of their banks. (5) Traders on the FTSE must have a collective IQ only just in double figures.

Or put another way – in the spirit of this site’s mission – it’s all bollocks.

Related: Blamestorming in readiness for Crash 2 ; The shifting sands of Lagarde’s arid mind ; Impotence v Importance in political decision-making

 

 

 

CRASH 2: Give credit where it’s due…..

…..and take charge of the aftermath.

In this, the final crunch match between the Eggheads and the Crash, team spirit among the Eggheads is not all it might be. Ben Bernanke looked almost truculent following Christine Lagarde’s man-the-lifeboats speech at Jackson Hole last Saturday, and the boss of the EU’s piggy bank Jean-Claude Trichet said she was “quite wrong” to call his little piglets wobbly. Although she is of course quite right about their fragility, in one mighty leap she has gone from driving the French nation into debt, to complaining about the amount of cash in European banks not being enough to cough up for disgracefully accumulated sovereign debt in the EU. Quietly seething in the Elysees Palace is Nicolas Sarkozy, a man already behind in the polls, and thus not exactly crying out for a collapse in the public finances on his watch.

Trichet doesn’t like Lagarde, and he doesn’t like Frau Merkel much either. But Merkel herself is in a deal of trouble, because a head of steam has been building up in Germany that, as I’ve long suspected, is going to call the next round of bailouts offside – including the one being lined up for Greece – and very probably defeat Merkel in the Bundestag. The Greek people in turn aren’t getting on too well with their ‘government’, which has effectively been neutered by events; and after requesting emergency aid for its banks last week, the Athens Government facilitated the fastest merger in banking history by allowing its second and third biggest institutions to join forces – the better to pile up the sandbags against the coming waves of foreclosure.

So apart from US and French Presidents distracted by re-election, a revolution on the boil in Greece, a constitutional crisis about to sweep Merkel away in Germany, the Italian leader Berlusconi beset by charges of under-age sex and corruption, and at least one major bank already on a drip feed from US FX emergency dollar funding, the Eggheads team is focused and ready to face the challenge ahead.

Yes, well – not really: the Eggheads are Arsenal in this encounter, and Crash 2 a rampant Manchester United. I feel sure that in the various White Houses, Downing Streets, Elysees Palaces and Beijing mausoleums around the globe, only the truly dense people at the top are in the slightest doubt as to the eight-goal rout that is coming. The main task ahead now, for the politicians who facilitated this mess, is one of finding the best things to blame – via which, they hope, any responsibility attaching to them might usefully be shrouded in heavy mists of alleged serendipity.

Last time around, Bush blamed the ease of access to alcohol on Wall Street. Eric Daniels of Lloyds Bank blamed Greenspan, and Gordon Brown blamed Esper & Marlene Hillbilly of The Tree-House Branch, Tennessee, for their unwisely successful $2.3M mortgage application of September 2004. Adam Applegarth of Northern Rock blamed the rates for going up, Hank Paulson blamed Congress for not giving him absolutely all the money in America when he asked for it, and Goldman Sachs blamed Clinton for forcing banks to give black folks mortgages they didn’t deserve.

This time, the Chinese were first out of the blocks, naming and shaming the US as the prime culprit. Washington didn’t have to look very hard before alighting upon S&P, the ratings agency that had downgraded its debt; although some time before this, Obama had fingered the GOP for its audaciously irresponsible attempt to stop him launching a free National Wealth Service during election year. The Tea Party blames Washington because it’s there, but at the moment Greece is in the lead by apportioning equal blame to Goldman Sachs, the ECB, the previous government, the IMF, Moody’s, Fitch, and anyone who was nuts enough in the first place to ever expect them to pay the money back.

Last Saturday was Christine Lagarde’s bid for freedom, and it’s clear she has two targets in mind: the banks for not recapitalising, and the taxpayer for being too mean. Both are incredible as objects of blame, but its never stopped her before, and it certainly won’t now. So it only remains for me to size up what the late starters will do….once even they have spotted the inevitability of le deluge.

The Labour Party will blame the UK Government’s programme of cuts – except for Harriet Harman, who proposes to lump all the guilt onto the EMA scandal, as she’s taken to calling it, and gender inequality. The Guardian will probably blame everything done since May 2010, and toss in a conspiracy theory involving James Murdoch for good measure. George Osborne will blame the EU for not getting a grip, and – if things turn really tough – David Cameron for giving in too much on expenditure cuts. Cameron himself will naturally blame Brown, but single the banks out for special praise and complete absolution.

Angela Merkel will blame lazy latinos outside Germany and electoral agitators inside Germany, prior to finding a Dutch UKIP militant setting fire to the Reichstag, and then declaring a State of Emergency. Sarkozy will blame the Germans for exporting (and exorting) too much, and the British for not stepping up to the negotiating table. President Herman Van Rompuy and President José Manuel Barroso will blame Brussels for wanting two Presidents, and EU citizens for not loving the EU passionately enough. Sarah Palin will blame the Russians, and flouride in the water supply. Putin will just pip Greece at the post by blaming the weather, the Ukraine, the Mafia, South Ossetia, the Chechens, anyone from Georgia, and Boris Nemtsov….assuming he avoids committing suicide by falling off a Moscow tower block before Crash 2 finally gets into its stride.

And finally, what of perhaps the two most influential players on the stage of this third-rate farce – Ben Bernanke and Jean-Claude Trichet? Bizarrely, I’d imagine that Bernanke will blame consumers for deliberately refusing to consume, as they were meant to do in his models….although he will be patronisingly sad, rather than angry, in making this judgement. And Tricky Trichet will blame all 27 EU member States for their insolent disobedience to the dictates of his Central Bank. For they unpardonably sabotaged his one big plan…to retire before any seriously smelly stuff got chucked at the fan.

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What we are about to see is the Search for Sanctuary that always accompanies a screw-up. And out of all the blamestormers, perhaps only one will lay the blame squarely at the door of deregulated banks: Mervyn King, the Governor of the Bank of England. He won’t be entirely right (and he certainly must shoulder at least some of the blame for his dilatory attitude in the boom years) but he will be more right than the rest of those miscreants listed above. As with the BBC, King is a curate’s egg who nevertheless gets far more of a whipped backside than he really deserves: just as the Beeb became anodyne after the Iraq unpleasantness involving dead doctors and dire threats from Alistair Campbell, so too King’s opening observation  – that Northern Rock should be left to fail – was greeted with the sort of pernicious vitriol from Brown and Darling that made a mockery of the BoE’s ‘independence’.

But what of the rest of us? I suspect we will remain as clear as we were three years ago about what has caused us to be back in the cess pit, only deeper than ever. On a planetary canvas, it’s terminally obvious that globalist exporting is not the answer – and globally based banking does little except shove paper around while underwriting megamergers. Export mercantilist mania will one day lead to catastrophic war unless it is reined in. Derivatives threaten the fiscal survival of every nation on Earth. And the never-ending shareholder quest for Bigness kills more jobs with every month that passes.

Equally clear is that a globalist business perspective removes all respect for, and loyalty to, national needs. As Homo sapiens is a pack animal, this too is a very bad idea. Further, national politicians are running scared of business, banking, and media power. We can laugh at their silly strutting, but the erosion of sovereignty is an even worse idea.

At a level more local to Sloggers, an administratively strangled EU has failed miserably on the twin bases of creative entrepreneuralism and wealth creation. The growing suspicion of wannabe superstates per se is based on the same old social anthropology so often ignored by politicians: they are too big and prone to being hijacked by unproductive functionaries. But primarily, the EU will eat itself because it has failed to grasp the concept of a varied Europe creating eclectic businesses and products that the rest of the world might want.

Specifically, the European Union’s crazy disregard for focused investment – and an equally mad commitment to cheap, unsecured credit alongside polemic wealth redistribution – is at a tipping point. Put simply, the EU tried to put unaffordable and undisciplined fantasies into reality. This is by far the factor most likely to infect the US, and thence the world economy as a whole.

I doubt if, in the end, there is any point to blamestorming. There is, however, a lot to be gained from a reasoned post mortem. The results of such an investigation ought to mean an end to globalist, neo-fascist conformity in favour of varietal self sufficiency….invention on a global basis, wherein exports are a bonus other markets can enjoy – rather than the be-all and end-all of everything.

In such a business context, domino-falling investment banks would be a bad dream from the distant past, and the business of financing entrepreneurs or mezzanine concerns would be a far more diverse process. The aim of most nations would be self-sufficiency in everything from food and natural resources to energy. We will never achieve that of course, but in a way, that’s the point: without an ideal to aim at, humanity will always be tempted to languish in a ditch.

Aspiration is the main thing we have lost after 35 years of Friedmanism. Protection of what we have, obsession with the material, and short-termism have replaced the great quest….until we are indeed in a ditch of our own making. We have rewarded lazy shareholders, as opposed to investing in the future. The tiny minority has sought to profit from monopolies, rather than a majority hell-bent on their ideas and labour offering reward for them, and fulfilment for others.

The mutual, varied community will one day replace the Big one-size-fits-all society. When it does, we will all be the better for it. But it won’t just happen: we have to make it happen. Once the Judgement Day has passed, and the blame has been apportioned, it’s up to us to take charge in the community that replaces the society.

The UK bank holiday is over, as are most of Europe’s August vacations. From tomorrow, the debt pantechnicon rolls ever nearer. There will be no place for negative blame in this new future. Instead, a positive learning process must take over. Actually – whether the elite like it or not – cultures usually learn far more from mistakes than from success. If they can no longer do that, then every sensible citizen should desert that culture in search of a better one.

ANALYSIS: Christine Lagarde on banking strengths and weaknesses, June 2010 – August 2011.

Grown men fighting for the privilege of vapourising Christine Lagarde

Isn’t it funny how a new job changes one’s perspective?

24th March 2011, The Guardian:

French finance minister Christine Lagarde has launched a scathing attack on Britain’s financial watchdog for undermining a proposed system of regulating EU banks. She accused Lord Turner, the chairman of the Financial Services Authority (FSA), of unwarranted criticism of the new stress tests on Europe’s banks.

Lagarde said: “I respect the fact that he wants to be more demanding and thorough, and have reforms that are deeper and better than today, but the way he is going about it undermines confidence in the process…..the type of stress that will be used to test the capital ratios of banks is much stricter than last time. It is sufficiently stressed to be an unrealistic expectation of what they will face.”

Today, Christine Lagarde is the head of the IMF. This from the FT (£) reporting from Jackson Hole yesterday, 27th August 2011:

Lagarde calls for urgent action on banks.

European banks may need forced capital injections to stop the spread of the eurozone’s sovereign and financial crisis, Christine Lagarde has said….“There remains a path to recovery, but we do not have the luxury of time. European banks need urgent recapitalisation to stop the spread of the eurozone’s sovereign and financial crisis….They must be strong enough to withstand the risks of sovereigns and weak growth. This is the key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis.”

Aaah…right, now I understand, Chrissie ma chere: we need urgent action to help these perfect capital ratios face the very thing they will never have to face.

I must say, you have to respect a person who changes her mind so decisively, so suddenly, and, um, so completely.

There remain some out there in threading land who think my incessant attacks on Christine Lagarde might be anything from arrant sexism to vindictive envy of her suntan. And it’s true, I have been slagging her off for some time. In fact I’ve been laying into this silly woman ever since this BBC piece on 4th July 2010:

French Economy Minister Christine Lagarde said the results of tests, designed to boost confidence in the sector, will be known on 23 July. And she predicted the tests will show European banks are “solid and healthy”.

My worst anxieties about her abilities were given greater weight when she said this to the Economist 20 days later:

“All I will say is that, number one, as far as my banks are concerned, the French banks, I am very confident about the results…”

Now call me wacky here, but I don’t see anything in Lagarde’s statement at Jackson Hole to suggest that it’s all a terrible mess and please can we hurry up please except for the French banks. And as we now know, of course, two of France’s largest banks are the most exposed to Greek catastrophe….from which we may only be days away. Days away, in fact, from “an unrealistic expectation of what they will face”.

This is the same woman who, in 2008, forecast four periods of French growth from late 2009 onwards….none of which were right to within 70% of the actuality. This is the very same woman who left French finances in such a dire state, two weeks ago President Sarkozy was forced to declare emergency plans to immediately curb expenditure.

The world is on the brink of the worst econo-fiscal disaster in modern human history. And in this pre-apocalyptic situation, the US Fed is being run by Chance the Gardener, while the International Monetary Fund is headed up by a giant freckle.

When ordinary, commonsense people allow important positions of power to be handed to those who are useless (and thus unlikely to threaten They Who Must have Everything) it is going to end in tears. The only amusing irony I can see in all this nonsense is that future historians may well put the collapse of Western liberal capitalism down to Nafissatou Diallo.

For the sapiens Homo, too much of what you fancy leads to chaos.

I am one of those naturally lazy but socially disciplined people who has to follow the Maoist principle of ‘every journey begins with a single step’….and then keep on taking the steps. Once I stop taking the steps, I figure, that’s it. The End. Throughout life, others tell folks like me, “You drive yourself too hard – take a rest”. But this I see as bad advice for we who know how a rest might turn out. My rest nightmare involves getting up, eating something junky, and then sipping gently at four bottles of wine – while watching the grass grow to eight feet in height – before retiring back to bed. I last did that when I was a student (replace wine with grass) but the memory sits in my psyche as a nightmare lesson about how a life without self-control leads quickly to disaster.

My Dad – who was just like me – used to call this “Staying on top of things”. He was a man of steely willpower, Pop: for years he washed and waxed his Honda Civic every week, and then forgot he owned a car. Whenever I cross our pebbled terrace making for the steps to the pool, I stop to pull up a few weeds. If I stop doing this, it seems to me, they will strangle us within weeks: I will become their slave, serving up hourly doses of MiracleGro and asking, “Will there be anything else, m’Lord?” But my instinct is to sod the weeds and instead meditate naked on the lawn.

For some people, bowels must either be regular or abnormally sporadic: go when even the mildest suggestion of evacuation suggests itself, or you’ll be bunged up for decades – an energyless person dragging round the world’s most inflated bottom. From perfectly tuned excretion to fairground attraction in one fell swoop. Others still harbour the same fears about housework and diet: zap every speck of dust you see 24/7 and never let a roast potato pass your lips – or a year later you will be Mrs Fatisher, frozen in cobwebs and covered in dust, your only consolation being the mice that come daily to nibble at that last frozen pizza – the one which started your descent into inanimate blobbiness.

The more sane among you will recognise all this as the telltale belief system of an extreme personality. Everything must have a name these days, and extreme personality (EP) is the one that our armies of excuse-makers and thinky-dinks have attached to me. The problem with their analysis, however, is that it’s underpinned by the assumption EP bad, fluffy good.

Those on the other side of the life-line see and do things in an entirely different way. Relativism, manana, turning on and dropping out, laissez faire, whatever, behaviour is a spectrum, I’m OK if you’re OK, loosen up,chill out, yehbutseefingizzlike, one more biscuit, guilt is bad, arsing about is good……the whole approach is, let’s face it, infinitely more attractive.

Unfortunately, in Fluffyworld things can go very badly wrong for society – whereas in the EP Universe, the pain tends to be personal and private. In Fluffyworld, there are (in no particular order of demerit) obesity, riots, feral kids, deficits, ClubMed debtors, the Secret Family Courts, looting, Seven Kids by Seven Fathers, Olympics tickets anarchy, chlamydia, wind power, nettle wine, Human Rights, Islamist bombers, Tony Blair, multiculturalism, lethargy, and a Franco-German hegemony in the EU. In EPville, there are depressive interludes, obsessive compulsive disorder, and suicide; none of which, to my knowledge, have ever started a war, exploded into a social problem, or got the Daily Mail into a bit of a state.

Ever since the dawn of Person, natural selection has been sticking a judicious mixture of Fluffies and EPs into the womb of Woman across the planet – the aim being to produce a healthy range from policeman to artist. The flaw in this idea is the assumption that no policeman would ever want to ban an artist. And no artist would ever presume to pronounce on the role of the police. The gaping hole in evolution’s logic, in fact, is that it never foresaw how the human brain would develop two hemispheres….and that human social intercourse would further confuse the constant battle between these terribly tenacious twins.

Good v Bad, Light v Dark, God v Devil, Weeds v Meditation, Weed v Getting things done, Buddhism v Plumbing. These are the dilemmas of being human. Chaotic inbetweenness is the result, but this is far preferable to the victory of one over the other. I’ve been a chaotic inbetween all my life, and trust me – it’s a lot more fun than being Ben Bernanke.

 

BERNANKE SPEECH ANALYSIS: Systemic, academic, optimistic, pathetic .

Bernanke…blue skying while in the red

Memo to Obama: fire Bernanke

‘In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus. We discussed the relative merits and costs of such tools at our August meeting. We will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days (the 20th and the 21st) instead of one to allow a fuller discussion. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability.’

The paragraph above is pleasing to me in one tiny, egoistic sense…it is exactly what I predicted Fed Chairman Ben Bernanke would say at Jackson Hole: nothing. The bloke took the above long and rambling yes-and-no-with-reservations paragraph to do it, but in the end what we were left with was a vacuous summary of what we knew already. It was tame, lame, and more of the same.

Looking back at the text, there is the overwhelming sense of reading something by a system-obsessed academic with little or no connection to the real world or the human species – in short, an economist. And yet when it came to that system overall, Bernanke had nothing to offer in the way of useful analysis as to how it might be changed – or morphed into something better. Everything, it seemed, was just fine with the car, but we needed more work on why the wheels kept coming lose.

Every glimmer of hope was presented as sunlight drifting gently across the uplands of Sugar Candy Mountain. Ludicrously, the Fed Chairman said the US trade deficit had narrowed markedly. Well, if nobody’s buying imported goods on Main Street Ben, that’s gonna happen. Commodity prices were falling, and so this would reduce pressure on the price of importing stuff. Bollocks: the value of the Dollar is decreasing far more rapidly. While the recovery was ‘less robust than we had expected’, the ‘traditional forces’ would soon get to work building on that recovery. Without $2.8 trillion thrown at the economy, there would’ve been a slump: where have these traditional forces been over the last three years?

Next came a moment of pure Peter Mandelson: ‘let’s not talk the US down’. It still had, Ben mused, ‘the biggest and most diverse economy in the world’. Er…and the biggest debt, the dumbest politicians, the greediest banks, and the most overpriced stock market. From Mandelson, he switched to pure Brown, looking to put the blame elsewhere: after all, Europe was in the doo-doo, and if the backwash of contagion from there got into this thriving, diverse economy well – it could ruin all the Fed Chief’s carefully laid plans. Oh…and another thing: those pesky guys in Washington arguing uphill and down dale about a $13trillion deficit. They might screw things up too. Boy, did they need to get their act together.

But it was one short vapour trail halfway through the address that caused the hairs on the back of my head to prickle menacingly. This was the point at which Ben Bernanke briefly went into Christine Lagarde mode, asserting that

‘…acting now to put in place a credible plan for reducing future deficits over the longer term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives…’

It was almost word for word the same primary school ‘Janet & John Play House’ that Lagarde had served up in the Financial Terms eleven days ago. The very same ‘If Dad gets a better job and we buy from Aldi not Waitrose, we can save the house’. Once those traditional forces get to work cutting prices and finding Dad a job, of course.

The bottom line (in dayglo red) was that the Fed Chairman had supreme confidence in a system that had blown away trillions in tax dollars, brought the global banking system to the verge of collapse, done nothing to address the real problems, resulted in a 30% cut in living standards for most Americans over 12 years, increased the gap between rich and poor, and produced an outcome whose baseline for success was the lunatic idea that if we all just keep on spending and getting deeper into debt, there’ll be nothing to worry about – the system will self-correct and off we’ll go again.

Which always leaves me with the same question: if the system solves itself anyway Ben, why do we need people like you?

The People don’t need the Ben Bernankes of this world – the folks with the benign smile and the carefully eccentric beard. It’s the political set, multinational business, and the banking spivs who need people like Ben: people too wrapped up in their charts, models and projections to ever become a nuisance. People to give the whole khazi a look of respectability. Those former Goldman Sachs people who thrust Bernanke at a grateful Bush as the best guy to make madness look like a science – they need him. The same crooks who told Obama to keep him on, with which the President complied because he had come to Washington in order to make change we can believe in.

In a pre-Election year, there is no way a limp wrist like Barack Obama is going to fire the helmsman. So our situation remains the same: we have a profound problem, and no radical creativity to hand. Oh dear. (Or words to that effect)

The full text of the speech is here.

Related: The triumph of impotence over importance.

Crash 2: How we got here

From the archives: 15 months on, has anything changed in global economics?

I posted this piece on May 23rd 2010. In the light of yesterday’s stream of banalities from Ben Bernanke, I have seen and heard nothing in the interim to change my mind.

Tomorrow, I’ll be offering an analysis of Ben in the Wyoming Hole. But in the meantime, you might find this interesting reading.

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ANALYSIS: The last thing capitalism needs is a new orthodoxy.

Capitalism has lost touch with its consumers.
The only way it will solve this is by getting bourses
out of the way.

Pimco’s Bill Gross tried to sum up capitalism’s problem recently at a New York meeting of Mammon’s biggest brains. He said:

“The Republican orthodoxy of lowering taxes is broken. The Keynesian orthodoxy of government spending is broken. What we really need is some new kind of orthodoxy.”

Mr Gross is a little late in asking for this (some of us have been doing it since 2004, and better folks than me for much longer). But nevertheless, his honesty is a refreshing change from the mix of compulsive mantras and third-grade insults one normally gets from corporate America – or most other places for that matter – whenever you dare to suggest reform.

I’m not sure we need an orthodoxy at all. The trouble with orthodoxies is, they’re fine until something or somebody unorthodox comes along. Creativity thrives on unorthodox thinking – and if there’s one thing capitalism hasn’t had for nearly forty years now, it’s creativity. Capitalist thinking keeps on revisiting old ideas, and burning creative people at the stake. In this sense, it is very little different to the Spanish Inquisition – in which an unorthodox, anti-cruelty religion thought it could advance its cause through the cruel enforcement of orthodoxy. There’s a gag about orthodoxymoron in there, but I can’t be bothered: it’s Saturday and I’ve just been mowing the lawn in 32 degrees of heat.

I’ve felt for a few years now that linear thinking about ‘the next stage of capitalism’ isn’t going to cut it. I’m also double-dog certain that no politician is likely to come up with the answer, because they’ve all convinced themselves that philosophy is dead. People who spout that sort of piffle really mean, “I’m bereft of ideas”.

If I were one of those captains of the big league meetings organised in the Algonquin twice a year to shoot the breeze on this sort of stuff, I hope I’d have the nerve to suggest two things: first, enumerate what the problems of capitalism are; and second, look at what’s changed since capitalism was invented. Then you might understand why you’ve lost the plot.

I’d list its truly serious problems in question form as follows:

1. How can capitalism be made to work without the need for everyone and everything to be in debt all the time?
2. How can capitalism get itself some new methods of raising money that don’t involve all of us having to deal with vulgar barrow-boys and gentleman safecrackers?
3. Is capitalism capable of seeing that committed, onboard shareholders are likely to make better partners than investment banks, hedge funds, neurotic assurance providers and governments?
4. Can capitalism think up some more planetarily safe goals than materials rape, atmospheric muck, mass production and private profit?
5. How can capitalism thrive in a balanced, happy society and vibrant culture – without causing people, marriages, banking systems and computers to have breakdowns?

You may detect some doubts about capitalism per se in all that, but if so you shouldn’t mistake that for my membership of other clubs ranging from dictatorial command economies through to tree-dwelling communes that recycle their farts for the common weal. I’m trying to look forward here – hence my second point about what’s changed since capitalism got off the ground, and began to walk on all fours.

The system which inspired the one we have now started as a servant of agrarian needs. People had sheep, and the wool had to be knitted into clothing. They had wheat that needed to be gathered. They had horses needing carts. And as the population grew, all these things had to become more efficient. So other people made spinning machines, mechanical harvesters and traps for ponies. They built places called manufactories, they employed people there, and they moved from subsistence to surplus -that is, making lots of capital. With this achieved, they used the capital to improve and expand.

The key thing to note here is that while the population was growing, there was no overpopulation. There were also no consumer goods sectors, cars, retail parks, hedge funds, welfare systems, housing markets, international banks or insurance providers. There was a small stock market, and one or two investment banks usually run by people called Rothschild. And there was no tradition of We Must All Have Loads of Money.

This epoch (from the mid eighteenth century onwards in the brand-new United Kingdom) also had many things we don’t have. These included a vicious penal system, grinding poverty, aristocrats with the money to back up their power, almost universal marriage, a house in the country because that was where they lived, and a religion that preached salvation in the next world rather than great wealth in this one.

The Sun headline is that finance existed for the system (not the other way round), most people were in touch with the land, there were no populatory or ecological problems….and the vast majority of citizens were content with their lot. None of these rules apply today, but – after several failed attempts to replace it – capitalism is still around.

What I’m suggesting is that the five searching questions I enumerated earlier show that capitalism has made the fatal mistake of those who fail to succeed under that very system: it has lost sight of its market, and its competitors’ innovations.

It hasn’t noticed that its consumers can no longer afford to consume. That excuses about dysfunction financial institutions will no longer wash. That small businesses and staff-owned concerns produce higher productivity, lower employee churn and clearer leadership cultures. That water is scarce, and can’t be left in private hands if those private hands are usually in the till. That carbon economies don’t seem to be a good idea. That there’s a hole in the ozone layer bigger than Australia. And that Mammon’s materialism has helped produce a society where abuse of booze, obesity, divorce, feckless fatherhood, confused children, dying communities and credit cards can no longer be dismissed as a bit of letting off steam plus a naughty knee-trembler away from home come Friday night.

To be equable for a minute, it’s worth pointing out that the Labour Party, most of the political class and pretty well all the media (with one or two admirable exceptions) haven’t worked this out either. But that observation isn’t going to put butter on the parsnips: the fact remains that free-market capitalism, under which we sell more and more to people with less and less, is a system doomed to failure, likely to evoke the very social unrest it avoids, and in need of some very seriously unorthodox thinking.

Ironically, the good news is that contemporary capitalist structures are mutually interdependent. This has also been the bad news since 2007, but for serious reformers it is in my view a blessing: remove the core daft idea, and a lot of other stupid practices will disappear with it.

A good example of this is the principle of remote shareholders in plc’s, whose aims are often antithetical to those of the company. Discourage them, and you almost immediately remove the need for analysts, demands for 25% year-on-year growth, bullying employer practices, and the existence of insurance providers as major players on the world’s bourses.

I believe that public quotation – and the spurious ‘services’ that go with it – are at the heart of capitalism’s disease as a system: the existence of risk is replaced by the demand for reward. The sensible approach to marketing in an ecologically dangerous environment is replaced by the desire to flood the market with crap that breaks down within a year, and thus requires replacement and recycling. Take public quotation out of the equation – or better, give it a far smaller share of the money-raising market – and the mass production/higher profit obsession goes with it.

The system’s internal illogic centres chiefly on debt-fuelled consumption, but this too stems from the need to give the bourse men targets. In a sane world, if you have a recession, the management takes a profit holiday, looks closely at its employee/product line configuration, and waits until people have money again – by which time (hopefully) the marketing folks have studied what this changed consumer needs, rather than just what he or she say they want.

Perhaps the one thing most out of step with human and planetary needs is globalism. The very fact that we are told daily it must be the future is the best guarantee that it won’t be. But without a system based hugely on bourse-raised finance (and the inbred, intrabank trading lunacy that goes with it) the globalist argument – flimsy as it is anyway – implodes.

There is no bottom line in this analysis; but there is a starting point, and it’s this: look at more diverse, community-based and motivating models of company ownership. Get the workforce into a new capitalist form that offers them reward for hard work and ingenuity. Rely less on bourses. And stop the crazy domino-globalism in the banking system.

The world is not a community – any more (as we’re seeing right now) than Europe is a Union. People relate to manageable pack-sizes, and the communities they crave are dying because retailers got into a City-fuelled pissing contest. Move on from bourse-dominated capitalism, and a whole raft of other problems will start to get solved along the way.