Monday, January 26, 2009
I notice that the Year of the Ox is supposed to be a fairly steady year overall- after the challenging times that last year- the year of the Rat apparently- laid upon us, I don't suppose that anyone will complain about that.
Strangely the three Baltic countries are said to be Ox countries- so perhaps this may be a good year for Estonia- I certainly hope so. Incidentally Britain, like China itself is said to be a Dragon country, self centred but glorious... hmm.
While I have no real belief in the impact of horoscopes, Chinese no less than Western, I am nevertheless still quite happy to wish all my Chinese friends a very happy and prosperous new year!
Sunday, January 25, 2009
Nae fie in times a war an' financial exigency
tae hear yon scunner roar oot his ain bile.
Ilka the fear marks oot the cauf forby
The mistakes a' his ain fowk he seeks to force upon anither.
By fit richt hae he to talk?
For aye his quine, the blessed Margeret,
Presumed tae lecture Scots?
An' that impiety took place wi'in a Kirk!
In fit miekle mind can aye hatred o' five million hide?
Fae meikle nonesense fit muckle rang and richt may find.
An' a' we ken the guineas stamp wiz but the rank
forby the gaud hae gone awry.
An' aye the list is muckle lang fae a' hae trod on Scotland's dignity
fae England's metropolitan toon.
Noo we ken the truth:
Yon portly scunner hae nicht ony word tae say
Scots a' nae sicht rustic fowk
Saturday, January 24, 2009
A huge part of our national wealth and prestige, the City of London, is massively weakened. This matters hugely because so much of our innovation, so much of our best talent was invested in the financial services sector. Now a great part of the attraction of London as a global city has gone. The impact of fewer and lesser international connections will reduce the capacity of all of the British economy to enrich our citizens. All of us are going to get a lot poorer.
Yet the mass of the political class- Conservative as well as Labour- are still speaking in terms of the past. While it is understandable that Mr. Brown would want to keep flogging the dead horse of his policies, it is very worrying to see how little thought or imagination is being shown on the opposition benches.
Yet there has been one small straw in the wind about how our country might restore some of its lost wealth and pride. The attempt by the government to prevent publication of MPs expenses was blocked, not by the opposition, but by a determined campaign launched by bloggers over the Internet. Of course the cause was an easy sell: in the real world all of us must account for every penny of our expenses, both to our employer and to the tax man, the idea that MPs would not was outrageous to almost everyone else.
However, the possibility that citizens may still exert pressure on their elected representatives outside elections is an intoxicating one. That so many citizens were prepared to make an issue of this was also encouraging.
Yet we need a political system that is more transparent and more responsive not just to flash campaigns, but to a far broader range of knowledge and expertise. Parliament and government remains a closed and exclusive club with almost insurmountable barriers to entry. The "free market" in British Politics is nothing of the kind, but a labyrinth of restrictive practices. It is not much of a democracy when the fate of this country is decided not by the equal votes of all our citizens but by a few tens of thousands living in marginal seats. The unbalanced electoral system prevents new ideas, still less new parties, from being able to enter the political world. The result is a divorce between those inside the political class and the rest of us.
I believe in the energising power of competition in party politics, just as much as in economics.
At a time when it is quite clear that we can not go on in the old ways in our economy, it is clear that new ideas and new hope is needed. I do not think that it will be enough to change the party of government, though that is now desirable and likely, we must change the system of government. Greater transparency, greater accountability and a wider range of minds operating in the political world must come.
The alternative is for Britain to become like nineteenth century Spain: alternating political parties that only serve to mask a unified, closed, corrupt and incompetent political elite.
Perhaps it is time for a mass of bloggers to unite not just around a single issue, like the expenses of MPs, or even their respective party political allegiances, but to unite around a clear programme for the wholesale political reform of our country.
The nineteenth century slogan of peace, economic retrenchment and political reform still has echos for us in the twenty-first century.
Wednesday, January 21, 2009
Over the past two months, economic activity has fallen off a cliff. Advertising revenues at Britain's Channel 5 have fallen 30% in January alone. International trade is diminishing at a rate that has never been seen outside of war and plague: Container shipping prices from Asia to Europe have collapsed an average of 42% and in some cases the rates have even fallen to zero. These key trends are not being changed in any way by the actions of governments.
Investors in almost every single asset class are nursing substantial losses and the focus is on capital preservation and reconstruction: there is simply not the money to put into investments even if investment managers were willing to commit, which in the short run environment of dramatic deflation and zero interest rates, they are clearly not willing to do. Linked with this is that the clear failure of government bank rescue programmes will require massive and dramatic restructuring of all credit providers, which is a process that as Paul Myners says, could take as much as a decade. The intended and unintended consequences will be dramatic and could be highly destabilising.
This institutional restructuring is causing governments, especially the UK ,to take on very large new debt commitments. Governments are taking on a variety of different measures to attempt to compensate for what is widely perceived as a failure of the market. However the practical result is very likely to be the complete crowding out of private sector access to capital. This could lead to further falls in asset prices and a continuing deflationary spiral.
Thus it is that the government is now seeking a "quantitative easing"- that is to say that it is asking the Bank of England to print money. The intended consequence of this is a level of inflation that will diminish the total size of debt to a manageable level.
This is likely to be a catastrophic policy. The fact is by totally abandoning any reference to the free market in their bank rescues, the British government is exposing the tax payer to huge losses. Let us take the example of RBS, whose balance sheet has unquantifiable exposures in a wide variety of global currencies and financial instruments. The Royal Bank is likely to announce losses of £7-£8 billion for 2008 and its total losses will be substantially higher overall. The UK tax payer is now being told to underwrite the entire estimated £1.8 trillion of RBS liabilities and thus take in full all the potential losses on this portfolio. Yet the government seems to have no plans for disposals. The auctioning of the portfolio is not even being discussed. To put this number in context, it is nearly twice the entire British GDP.
The fact is that Labour are behaving as if the nationalisation will be permanent, with no plan as to how to restructure- beyond creating high inflation- the British economy could be massively damaged. My parents have been prudent all their lives and now the government will destroy what little savings they have put by for their retirement. I can only recommend them to buy gold bricks at the moment, even though they give no interest- but then, thanks to the government, nothing else is either.
Destroying the value of money is a criminal policy. For this reason alone Gordon Brown's government has run its course.
I now recognise the scale of what we are seeing, and can feel no optimism in the face of such instability and such pernicious policy making. This is now seems not even close to the end of the crisis, it is not even the end of the beginning.
And there is no telling what the global economic and political consequences will be. As for the United Kingdom: I am genuinely afraid. Our ramshackle constitution, unaccountable administration and loose public finances were already significant problems. Now I fear that they will be tested to destruction.
Tuesday, January 20, 2009
The latest inflation numbers, although above expectations still show a sharp fall and the trend is now firmly downwards. the problem is that the trend is so firmly downwards that it looks pretty likely that there will be several months of deflation later in the year. Such deflation is a measure of the scale of the bust which is now only beginning to afflict the wider economy. Depression 2.0 will be long and deep. Those confidently forecasting recovery in 2010 may simply be whistling in the dark.
Deflation is incredibly damaging to peoples well being: it undermines the whole economic mechanism because the time value of money becomes negative. Governments will do almost anything to avoid it. What the British government now seems that it will have to do is take on the liabilities of the Banking system directly. The renewed instability in the financial markets reflects the fact that the government- as Vince Cable predicted- has already lost the bulk of the first £37 billion. Nationalisation of RBS seems all but certain and the UK will need to take on a substantial open ended liability.
Of course the UK is not alone- despite the negative comments coming from such figures as Jim Rogers: "the UK is finished". Spain, Greece, Italy, and several other Eurozone economies are facing the need to take on giant sums of debt in order to stabilise their positions. Ireland has even warned that with out support from the other Eurozone economies (i.e. Germany) it may have to default. Dublin has now had to nationalise all of its top three banks.
It now seems quite clear that governments, in order to stave off the hard place of deflation will instead steer their economies onto the rocks of inflation. Inflation will reduce the level of indebtedness to manageable levels. That it will also destroy the savings sector is simply collateral damage- since after the 1970s, Governments believe that they can deal far more easily with the consequences of inflation than deflation.
Debouching the value of money is nevertheless a gigantic failure of any government. The consequences may be far more problematic than policymakers now think. In my opinion it would be the final nail in the coffin of Sterling and may compel British entry into the Euro on highly unfavourable terms- if we are lucky.
Yet the counter argument is that if all governments follow an inflationary policy at the same time, then the relative damage may not be so bad. Nevertheless there is a money beyond control of governments: gold.
Mr. Obama does not have so much room for manoeuvre, and the price of gold will demonstrate the level of confidence that investors are still prepared to show towards the greenback- and every other vandalised and inflated currency.
Monday, January 19, 2009
However the grand coalition has also limited much of the freedom of action of the administration. The controversial Nordstream gas pipeline project continues, despite serious concerns about security, largely because the former SPD Chancellor, Gerhard Schroder, has carved himself a role as the Kremlin's international emissary- which the current Chancellor, Angela Merkel is known to have concerns about, though she has felt unable to say so in public.
Although the government has been able to put together a credible set of core policies to face the credit collapse, and is still held in generally high regard, the more dramatic policy prescriptions have not been adopted, simply because they can not be.
However in September 2009, a new general election is scheduled and it is quite clear that the political weather in Germany is changing dramatically. The defeat of the SPD in the state of Hesse has been accompanied by a dramatic rise in support for the Liberal FDP, who have doubled their vote. It seems likely that the grand coalition will lose their control of the upper house of the German Parliament- the Bundesrat- because the SPD result was as bad as it was.
All the evidence suggests that the FDP are headed for an exceptionally strong result in September and will be able to join a new administration under the current CDU Chancellor, but without the Social Democrats. As a Liberal who admires much of the FDP, I am pleased to see such a prospect, but I am also pleased that the SPD will finally be punished for their naked and unprincipled ambition.
At a time when the European Union faces deep challenges, the presence of the economically literate Free Democrats at the heart of government in Berlin can only help to steady the ship.
Meanwhile the increasingly shrill commentary coming from the likes of Ambrose Evans Pritchard in the Telegraph is matched by a much more sober, though sombre analysis from Wolfgang Munchau in the FT . In the end, the bile of the anti-Europeans may end up "all passion spent", as it becomes clear that even the massive devaluation of Sterling that has already taken place has not solved the problems facing the British economy- far from it. Despite the increasingly hysterical assertions that the demonstrations in Riga and Vilnius are "in fact" against Europe, rather than the slow formation of policy in Vilnius and widespread disgust at the corruption of the power elite in Latvia, virtually everybody recognises that the European Union will have a critical role in working out the crisis.
After even in the UK, the appointment of Ken Clarke to the Conservative front bench shows that whatever his public words, the leader of the most avowedly Eurosceptic mainstream political party in Europe accepts the reality that the EU is not going to fall apart and indeed may emerge stronger from this crisis than it was before.
With the intelligent voice of the FDP seemingly set to be heard much more widely in Germany, that is quite possibly a welcome state of affairs.
Friday, January 16, 2009
His final press conference was of a piece with his conduct in office- no regrets and no explanations. However in in his valedictory he continues to demonstrate just how unfit a President he has been.
His comment on upholding the moral authority of the United States was surely designed to do no more than raise a cynical laugh: this was after all the President who presided over Abu Graib and Guantanamo, who prosecuted an illegal war and who- more than any single one of his predecessors- governed in a politicised and highly partisan manner.
I notice Andrew Roberts has written that he believes that George W. Bush was a "Good President". Frankly it seems to me that this is just another of journalistic contrariness: taking a position in order to make the story.
The fact is that, at home just as much as abroad, the popularity of this President could not be lower. His policy mis-steps, on the "War on Terror", on Iraq, on the Economy, have left the United States massively weaker: in hock to its strategic enemies and reviled for its arrogance and perhaps paradoxically for its weakness.
The Bushies were a narrow and exclusive group of like minded individuals whose approach to policy was the opposite of intellectual: it was faith based position taking and the consequence of this was a failure to deconstruct their failures until it was already too late. Instead of listening to the widest views, the Bushies talked only to the hard line right wing ideologues of the neo-Conservatives and in the end they made both the Administration and the Republican Party into prisoners of the extreme religious right.
Barack Obama inherits a legacy of division and of failure. The economic crisis he faces will brook no delay. Yet the scale of the problems are so large and the potential for politicking so tempting that it is hard to see how the American Constitution will be able to deliver effective decision making between the different branches of government, even if Obama has the right policies (and it is not clear that he has). "No drama" Obama will need every ounce of his legendary patience to get even the smallest changes underway.
Nevertheless on January 20th we can at least breathe a sigh of relief that at least George W. Bush is no more. Whatever the future brings we can, for a brief instant at least, hope that the 44th President will repair the vile legacy of the 43rd.
Thursday, January 15, 2009
Nevertheless, though I do not feel that I have an intuitive feel for Maths, I have always enjoyed reading popular science books and reading through the occasional copy of New Scientist.
The latest book I have been reading is written by the Cosmology consultant of New Scientist, Marcus Chown. The title, "The never-ending days of being dead" is perhaps a clue that the ideas in modern Cosmology are beginning to ask some very fundamental questions about the nature of the Universe.
In the end the questions that Cosmologists are asking end up sounding very much like the Question that was posed to the Deep Thought Computer in Douglas Adam's "The Hitchhikers Guide to the Galaxy": What is the Ultimate Answer? Even more extraordinary is that the existence of life on Earth may be inexplicable unless we see the Universe as having a purpose. One theory is that Universe can in some sense be part of a plan that instead of suggesting that the Universe is created by a God ends up with the conditions for the knowledge of infinite information, which itself would be omnipresent and omniscient.
Even more mind boggling is that the existence of the laws of physics as we known them may be entirely artificial. Whereas Douglas Adam's suggests that the Earth was a computer designed to find the question for the Ultimate Answer; Modern Cosmology suggests that there may indeed be an ultimate answer- Omega, an irreducible number that can not be generated by a computer programme shorter than itself - and that the Universe exists to calculate this.
As shocking and challenging as these ideas are conceptually, the fact is that these are implications that are supported by Scientific method. The laws of physics and even of mathematics, from Ockham's Razor to E=mc2 to the ratio of Pi all can support arguments in favour of this spectacular almost metaphysical version of physics. These are not invented as much of theology clearly seems to be, they are instead deducted, discovered ideas.
As we discover so much more about the Universe, Cosmologists are beginning to understand that there is much that is unknowable about the Universe, but from what we do know, there seems to be an order on a truly vast scale.
While it is a long way from the physics equations (s=ut + 1/2 at2) of my teenage years, I still see the connection and while I have no real regrets about following the Humanities, I wish I had a more intuitive feel for the pattern of numbers, then I might be able to appreciate not just the concepts explained in Chown's book, but the high mathematics that underpins the form and structure of the entire Universe.
Nevertheless I was lucky. An illiterate school leaver would struggle to even understand the first principles of this amazing and awe inspiring Universe that we find ourselves in.
Tuesday, January 13, 2009
That being noted, we should also be quite clear that the immediate resumption of rocket attacks from Gaza by Hamas after the end of a six month ceasefire was a quite deliberate provocation- in the full expectation of this Israeli response.
The demonstrations close to the Israeli Embassy in London have reinforced my concerns about the European response to the current violence. That so many of the large crowd were waving Communist Hammer and Sickle flags I find deeply offensive- as offensive as I would find the public display of the Nazi swastika. For me the only difference between National Socialism and Soviet Socialism is that the Soviets killed more people.
Then there was the rioting.
The wanton destruction of a Starbucks coffee shop and the looting of a discount clothing store called "Top Gun" - a shop ironically enough owned by an Iranian- reflected the fact that many in the crowd we the usual anti-capitalist malcontents happy to use the occasion of the Israeli incursion as the excuse for creating disruption. The response of the organisers to what was clearly orchestrated violence by elements of the crowd was frankly outrageous: "It is unfortunate that a small group of people did this. Police underestimated the number of people and tried to barricade them into a small area. They should have been more flexible over access". In other words the looting and criminal damage, the targeting of shops and businesses was... the fault of the Police.
No it wasn't- it was the fault of those who rioted and looted.
I do not think that the Israeli incursion is justified, and adding to the misery of Gaza seems to me likely to reinforce the support for Hamas rather than diminishing it. However Hamas are not an innocent party themselves; as always in the Middle east there is cynical duplicity on both sides.
However those who went to Kensington over the weekend have not bolstered support for the cause of Hamas. If you can judge a cause by its friends, it seems clear that there are some deeply unsavoury figures involved in orchestrating an anti-Israeli movement in the UK and they should be treated with scepticism- if not outright hostility.
Wednesday, January 07, 2009
"Mr. Putin assured Chancellor Merkel that "Russia will always be a reliable energy supplier". Mr. Putin was speaking as he launced a campaign to be allowed to control all the downstream gas networks in Western Europe.
7th January 2009
Slovakia declares a state of emergency as no gas at all has come through the pipe from Russia.
All of South East Europe reports complete shut-down- no gas at all being shipped. Poland reports 85% fall in supply, Italy, Austria over 90% and Germany "Significant disruption".
Happy Orthodox Christmas.
Monday, January 05, 2009
The traditional British Christmas over the last forty years has tended to be focused around the television- the nights are dark, and many channels put out special programmes "for the festive season".
This year, I notice what I feel is a certain coarsening of Christmas. The novelty songs of my youth: Slade's "Merry Christmas Everyone", Wizard's "I wish it could be Christmas Everyday", Jona Lewie's "Stop the Cavalry", John Lennon's "Happy Christmas, War is over" were not taken to be serious songs when i was a kid in the 1970s, yet now they seem to be regarded as somehow "classics". Indeed the Slade song is played absolutely everywhere- to the point of massive overkill. Meanwhile the real Christmas songs- the carols- of my childhood seem forgotten. Though the festival of nine lessons and carols broadcast from King's College Cambridge- which I listened to while driving up to visit my family- contained several old favourites, I was struck by the determination of the choirmaster to produce much that was innovative, rather than traditional. While TV or shops bawl out Slade's money spinner, the medieval purity of the Coventry Carol or the Victorian jauntiness of "God rest Ye, Merry Gentlemen" are now a closed book to an ever larger number of our people.
As for the TV programmes themselves- I am very surprised how quickly a programme is repeated on British television- even the interminable soap opera omnibus editions seem to be repeated even on the same evening- and frankly the miserable doings of "EastEnders" and "Emmerdale" bore me blue anyway. Apart from the Soaps, which do not exactly portray role models- I am astonished at the witless vulgarity on every channel. The intellectual aspiration which British television once showcased: "The Ascent of Man", "Civilisation" or "Connections" is replaced by "[insert celebrity name here]'s extreme [insert noun here]". I was astonished to find what in the 1970s would have been a mildly interesting middle brow Horizon documentary on the history of the British National Grid- presented by James May(!)- was actually an Open University broadcast.
Truly this is dumbing down indeed.
It is also very, very boring.
The poverty of aspiration makes for boring and very limited lives: much like those portrayed on EastEnders. The sloppy populism of British television which my TV friends openly admit (or should that be decry) as "a tabloid medium" could hardly be more crass. "Strictly Come Dancing"- or "Strictly" as most seem to refer to it, is a deliberate showcase, not of excellence, but of mediocrity- and perhaps the furore over John Sargeant shows that the British people get the joke. The fact that something so vacuous could be taken so seriously is frankly ridiculous.
Then we get to the News. The blatant manipulation of the current affairs programmes is obvious and dangerous. The independent reporter was once a by-word for integrity- not any more. The practically scripted "interview" by Andrew Marr of his Prime Minister was an insult to the genre. We have grown used to television shows with no understanding of the subtleties of argument, and still less the historical roots of our times. An interview of such banality is an abdication of the responsibilities of the fourth estate.
If we judge from British TV, there is little aspiration in the UK today.
When President Kennedy put forward his great vision of sending man to the moon and returning safely to Earth, he justified it by saying: "We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not only because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too."
If our newspapers are dumbed down, and our television likewise, how can an individual even know where human knowledge stands now, still less about how and where that knowledge can be extended. No wonder so many young people find life pointless: they know so little about it.
The patronising vulgarity of TV has infected much of our society- and I for one will not be buying a digital TV as the analogue systems are shut down over the next five years- I will simply cancel my TV license.
Enough drivel, boredom and poverty of the mind already.
Back to Estonia, where seriousness is not considered a character flaw and knowledgeable is not another word for pretentious
Friday, January 02, 2009
The emergence of a new, more coherent opposition grouping interestingly named "Solidarity" is obviously a welcome step, given how the factionalism of Russian democrats has been their principal downfall. That it comes at a time when the global economic crisis is placing increasing pressure on the post-Soviet government of United Russia and may help to articulate a real reform programme. Yet, we can not underestimate the scale of repression that Putin is able to deploy against his own people. The regime is well prepared for a period of violent discontent.
Yet the extremely rapid depletion of the long hoarded foreign currency reserves indicate that United Russia my run out of money before the bottom of the economic crisis is reached. The ill judged decision to try to defend the Rouble is proving incredibly expensive. As the evaporation of the Russian banking system becomes plainer, the fact is that, despite Putin's denial that there is any crisis, Russia is actually facing an even more serious position than the Western world- with all its major income streams collapsing at once and massive new liabilities to service at a time when it can no longer gain access to international capital.
All of this is matched by a collapse in political confidence inside Russia: according to some polls, the majority no longer trusts the state-run media to tell the truth, and they believe that the country is facing very serious problems. As of yet, these same polls do not detect more than a fairly gentle fall in support for Prime Minister Putin, meanwhile, perhaps underlining the difficulties of polls in Russia, the poll for the "Greatest Russian" showed very high support for the genocidal murderer, J. V. Stalin, who came third over all. Leaving aside the fact that his real name- Djugashvili- clearly betrays his non-Russian nationality, it does underline the large numbers still prepared to defend the vile and violent legacy of the Communist tyrant. Russia remains long way from a civil society.
The failures of Putin's economic policy grow more obvious by the day, but the regime has crushed nearly all alternatives- there is no "loyal opposition". Despite this, what is interesting is that such opposition as there is not coming from the quasi-Fascist groups like "Nashi" that many fear would be the primary beneficiary from the fall of Putinism. The reforming Liberals may yet emerge as the primary opposition - which could lead to a far more optimistic scenario than many, including myself have hitherto been fearing. Perhaps, when we said that these groups were Putin's creatures: created under his patronage to allow him to pose a a defender of the constitutional order, while nonetheless actually subverting it, we were more accurate than we knew.
Meanwhile, rumours swirl in Moscow that there is a real split between the constitutionally powerful President Medvedev and his actually powerful Prime Minister, Vladimir Putin. The next few months will see how genuine these rumours really are.
Russia remains an obvious threat- and the exercises that the Russian navy is conducting in the waters of Greece, a nominal NATO ally, underline the flaccid division of NATO about to how to deal with the challenge of an authoritarian government in Moscow. Yet the braggadocio of these more or less useless naval exercises a least keeps the fleet out of Ukrainian waters- where under the current tension, many Ukrainians would like to see them banished forever. The perennial January gas dispute between Russia and Ukraine is being treated as a bilateral issue, so far. However if the European Union truly wishes to make a statement to Moscow, it could do so, simply by getting involved and insisting on a faster agreement this year.
As "Mother Hubbard" Putin tries to find bones to pay off his greedy supporters and the increasingly alienated Russian population, the EU should make it clear that such bones can not come at the expense of Ukraine. That would be a clear signal that, notwithstanding the Kutznetsov cruising off Crete, the European Union will not be distracted from a growing insistence that Russia must either play by the rules... or get off the pitch.