Cicero's Songs

In October 1956 Britain and France,with Israeli support, launched military strikes against Egypt.  The military operation was entirely successful, and within a matter of days it appeared that all the operational objectives would be achieved.  However, almost immediately, the United States put so much pressure on their allies that the operation became unsustainable. Nine days after the attack was launched the Eden government declared a ceasefire and within two months all of the British and French attacking forces were withdrawn, leaving Egypt the clear victor, Eden himself was forced from office in January 1957.  The point was that even the formerly equal wartime allies were compelled to recognize the power reality- the hostility of the United States to the operation could not be overcome. From then onward the United Kingdom generally aligned its policies with the United States. It is tempting to consider that any American attempt to seize Greenland might be met with simil...

After a long time, Politics seems to be getting interesting again, so I thought it might be time to restart my blog. With regard to this weeks mini budget, as with all budgets, there are two aspects: the economic and the political. The economic rationale for this package is questionable at best. The problems of the UK economy are structural. Productivity and investment are weak, infrastructure is under-invested and decaying. Small businesses are going to the wall and despite entrepreneurship being relatively strong in Britain, self-employment is increasingly unattractive. Red tape since Brexit has led to a significant fall in exports and the damage has been disproportionately on small businesses. Literally none of these problems are being addressed by this package. Even if the package were to stimulate some kind of short term consumption-led growth boom, this is unlikely to be sustainable, not least because what is being added on the fiscal side will be need to be offset, to a great de...

A system where the choice of British Prime Minister is Theresa May or Jeremy Corbyn is -self evidently- a system that needs reform.    Despite the humiliation of a hung parliament, the current Prime Minister, Mrs. May, has nevertheless started the negotiation to leave the European Union. The Conservatives do not intend to stop at any halfway houses, but to leave the jurisdiction of the ECJ, and so withdraw from the customs union, the single market and essentially all the institutions of the EU. Although Brexit will cause major economic damage- not to mention trashing the national brand of the UK- it is not the most immediate problem the country faces right now. Britain is sailing into the mother of economic storms with the engine stopped and a huge argument on the bridge. The " sombre national mood " identified by the venerable Queen Elizabeth II is rightly named. The sense that the Brexit vote has cast Britain adrift in uncertain international waters has grown over the...

80% of the British press is under the control of off-shore domiciled billionaires. These shadowy figures: the pornographer Richard Desmond, the sinister Barclay Brothers, the oafish Harmsworth, and the borderline criminal Rupert Murdoch have established a hard right-wing agenda. The press, especially titles owned by the creepy and boorish Mr. Murdoch, have a well merited reputation for powerful lobbying in support of an extreme right-wing agenda. Since the referendum, their shrill support for the ending of all ties to the European Union- the so-called hard Brexit- has pushed the Conservative government to ever more hardline positions. However, despite the propaganda and the contempt that these newspapers have directed towards the near majority that preferred to stay in the EU, reality is- finally- beginning to bite.  The extreme position adopted by the May government has a price, and it is one that very few people on any side of the referendum debate would have been prepared to ...

The UK fiasco has continued unabated. Neither the Conservatives nor the Labour party have any effective leader. It is quite clear that the victorious Leave camp is totally divided as to what should happen next, and there is no clear plan as to what level of engagement or disengagement the UK will have with the European Union. The market collapse that is taking place is the responsibility of the utterly irresponsible leaders of the Leave campaign. So, it could well be that having wielded the knife against David Cameron, Boris Johnson may yet go the way of a previous Tory challenger: Michael Heseltine. Perhaps Theresa May as leader could provide some reassurance, but in the face of economic meltdown, the calls for an early general election -which under the circumstances is clearly necessary- may create an untenable situation for any party. The fractious and divided body politic of the UK is on the brink of collapse. The cowardly, but sullen and determined Jeremy Corbyn is facing the to...

George Osborne's budget was an incoherent collection of gimmicks. It was not designed with any other purpose but the promotion of its author and a certain faux stability ahead of the EU referendum in three months time.  So, easy to criticize, but the fact is that at the moment, no political party in the UK is prepared to suggest the kind of reforms that are needed. The political cycle is too short for any government to reap the reward of the kind of radical changes that are required, but not long enough for the same government to avoid the negative consequences that such radical reform will inevitably bring with it. So, successive governments merely tinker with the system, knowing that to do more carries greater risks and limited rewards in the short term. The cost of tax administration in the UK continues to increase, and the ever more complicated system imposes greater fiscal drag and ever more distortion of the economy. Incomes remain heavily taxed, while land is barely tax...

One of the most positive aspects of life in Estonia is that the average level of education is so high that you get used to people making good quality decisions. Intelligent, well-thought out government services, innovative and interesting technology and so on. This is why, when one does encounter Estonian examples of stupidity, it can be rather shocking.  There are small examples, such as allowing graffiti to get out of hand, which in the end creates far bigger and more expensive problems than an early zero tolerance policy does. There are bigger examples, such as the Estonian Conservative People's Party (EKRE) whose small minded, identity based political world view insults the visionary thinkers, such as Jaan Tonisson, who understood from the beginning that Estonian identity must rest on universal, European values. The identity politics of the barnyard that EKRE, Argentina's Peronist party and the SNP all, to varying degrees promote, can quickly descend into racist or homo...

As George Osborne rises to speak in the House of Commons this afternoon, I am sure that he will be feeling a little rueful. The Conservatives have talked tough on the deficit, but the reality is that many of the cuts they proposed were quietly rescinded when it became clear that they were often counter-productive. The crisis in British government finances can not be easily tackled by the piecemeal approach that both the Tories and Labour have set out. The problem lies in the the deep structure of the British tax code, which is unwieldy and expensive to administer and deeply unfair in its application. Without a wholesale -even revolutionary- change in the tax code, the nibbles here and there that he will set out today will not change the direction of travel for the UK. Despite much positive news- and the resilience of the UK economy is the object of some envy internationally- the fact is that the structural deficit can not be eliminated without drastic tax simplification and large sca...

A few weeks ago, Michael Goldfarb published an article in the New York Times highlighting the growing crisis in London property. His view- that Prime London property has become a global currency- has been said before, and rightly. However the timing of his article hit the zeitgeist of growing anxiety about the mismatch between London as a place to live, the capital of the United Kingdom, and London as a playground of the globalized rich.  The squeeze in London is having a strongly negative effect on large areas of British Society, and the influx of hot money from places such as China, Russia and the Arab World- not to mention crisis-hit EU member states is not just undermining the social fabric of London but the economic fabric of the UK. At the Liberal Democrat conference in Glasgow, several London based members made the point that these apartments now owned by the global uber-rich are often left empty, so at night you see few lights on in Mayfair and Belgravia- and the impa...

As the economic crisis of the West grinds on, I find myself noting that the mistakes of policy are more and more political mistakes, and that the failures of leadership are more and more failures of political leadership.  Attempting to create a safer banking system by forcing increases in reserves, through Basel III or restrictions in concentration, is in fact having almost the precisely opposite effect to that intended. The increase in reserves has not made banks safer, but it has forced a dramatic shrinking in bank balance sheets. The result is a crash dive in lending- especially to the critical small and medium enterprises sector. This is now getting to the stage where, in the words of a senior banker operating across the Baltic and Nordic markets who I was speaking to over the weekend: "within five years, no bank will be able to afford to take on SME lending". This continued credit crunch carries not only short term implications, but also long term implications, since the...

Bob Diamond is a figure who it is hard to love.  Ever since he made the comment that the " time for Banker's remorse was over ", he left a huge hostage to fortune, in the event of anything going wrong at Barclays. As we now know, something has gone wrong, and in the event, Mr. Diamond's bullishness has become his downfall- the time for remorse is now is the almost inevitable headline in most newspapers. Yet, although Bob Diamond may not be the most sympathetic creature, the reality is that - as his own resignation shows- he has not been in control of events. The fact is that the huge banking conglomerates carry within them the seeds of their own destruction. The interconnected nature of the global financial markets has created vast black boxes within the various banks, where few- if any- can understand, let alone control, the risks. The resulting lack of transparency has allowed financial malpractice and even criminality to flourish unchecked. All the Basel ...

A lot of anger is directed towards those in the corporate world who earn large salaries. Sometimes, in my view, that anger is not truly justified: for example, when an entrepreneur takes out income based on their ownership of a company, I -for one- tend to see it as just reward for those who take a risk with their capital. However, listening to Martin Sorell on the Radio trying to justify his large remuneration , despite the objections of the shareholders in WPP was not an example of just reward.  The fact is that Martin Sorell does not own the company he founded and built any more- his ownership is less than 1% of the shares- which still represents £800 million- after several sales, not least following his divorce from his first wife in 2005. he may have founded it, and built it but now he no longer owns it. However, Sir Martin, is insisting on a substantial increase in his remuneration, to reflect, as he sees it the success of WPP over the past year. Yet, he does not seem t...

Amidst all the Jubilee hullabaloo in the UK, the second- and ultimately more significant- story remains the ongoing crisis in the Eurozone and the continued instability in the markets. The signs of a slowdown in the Chinese and the American real economies have put further pressure on the Eurozone economies that are still struggling to return to growth.  The ongoing restructuring of the Spanish banking system has alerted the markets to the fact that their remains a significant capital requirement, even after the forced mergers of the Cajas . However, despite the more hysterical of the comments from UK commentators and politicians, the fact is that the Spanish economy does not have the same long term government problems as Greece does. The deficit issues are a function of the the banking system breakdown, not the series of policy mistakes that hampers Athens even beyond the banking crisis. As a result, although serious, there is far greater trust offered to Madrid- and that solidar...

Viewed from the perspective of the Euro's newest member state, the British political and media narrative still seems completely off the point with regard to the single currency. To reiterate: this is not a currency crisis, it is a debt crisis. The majority of the members of the Euro zone have controlled their deficits and are retrenching their debts. It is where deficits are not being controlled- in Greece and in the Latin bloc that the crisis has its centre. There are two sources of deficit pressure: one is fiscal incontinence, that is to say that the structure of debt is wrong or as the result of welfare or other general calls on the public purse government expenses are not being controlled versus government income. The second is the need to recapitalize the banking systems following a largely property inspired meltdown. The scale of the recapitalization is so large, because governments have undertaken not merely to compensate depositors, but all those, including bond holders...

In Tallinn Spring is slowly advancing into Summer. The Sun begins to offer some warmth and the days are growing long. In London the weather is less good. The rain and storms, that seem inevitable once a drought is declared, are clearly depressing the national mood. In the year of the Diamond Jubilee and the London Olympic games, the national mood still remains rather bleak. Although the local elections will probably be a nasty mid term shock to the coalition government, the elections that really matter to Britain are happening elsewhere. The likely change of government in Paris may see significant changes in French policy- and the demise of the Sarkozy part of the "Merkozy" partnership may simply be the prelude to a change in government in Berlin next year. Europeans have grown weary and disillusioned with the austerity program that has been imposed at the behest of the right wing-led government in Germany. The meltdown in Spain and the continuing crises in Greece and P...

The release of the latest revision to GDP growth in the UK makes grim reading. The British economy slowed by more than expected, and the outlook for recovery is flickering at best. Incomes have not kept pace with inflation, and the increase in taxes and cuts in government services has helped to cause a sharp contraction in the general British standard of living. Even for those on well above average incomes, costs such as insurance, university tuition fees and now energy prices are really hurting the middle class. For those below median income it is house rents and petrol prices which are beginning to have a crippling impact. The standard of living in London even for those on median income levels is now exceptionally poor.  So how come housing costs in Central London have continued to rise? The short answer is that it is not the British buying. Russians, Arabs, Chinese and others have been buying bolt holes in London, that is certainly true, but more than that, it seems that the...

As Monday looms ahead, there is now the real probability that Greece could default this week.  No one knows what happens in that event: the policy makers and many market practitioners now think they can cope- but the reality is that no one knows. I think we are about to find out whether Mrs. Merkel's policy of masterly inactivity will actually work. I don't think it has, and I suspect that the impending Greek default could well lead to the failure of Hungary and Bulgaria. This feels like the calm before the storm.

Well, of course the British press will respond to the gale of nonsense being pushed around by the Sarkozyites. The noise of discredited British "journalists", however, is nothing serious. What this drivel from Paris means though, is that France under Sarkozy has indeed decided that the French national interest is best served by there being not a rival to France for the affections of Berlin. The problem is that the obviously conflicted nature of the British relationship with Europe is more attractive to Berlin than Sarkozy's obsessive lurve-fest for Germany. Germany does not want a Federal Europe. Germany has therefore not delivered what Paris wanted, but instead of hating the thing which you love, the French have decided that "if only Britain was not around, then Germany would love us and deliver a Federal Europe": hence this absurd "declaration of dislike" against the UK. Of course the UK is financially weak, and almost all the French say is tru...

The weekly Parliamentary riot that is the British Prime Minister's Question time must have reminded Mr. Cameron how fractious his own party is, when it comes to the European Union. The problem is that the freedom of action that the government has on the issue is pretty limited. The Franco-German diktat, organised my "Merkozy" is pretty much the only game in town, since any proposal has to have the support of the German treasury. From the point of view of the UK, we have been outplayed and outgunned by the slippery French President.  That is... for now. Britain has been isolated for two reasons, one real, one a matter of perception. The first is that the UK did not an will join the Eurozone. The second is that British comments, however well intended usually sound like existential criticism of the Eurozone itself. However ignoring and isolating Britain on such subjects as the financial transactions tax may let backfire on "Merkozy", because they are not just...

The Bank of England made the following statement this morning: In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility. This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity. There is currently no shortage of short-term sterling liquidity in the market. But should that position change, the new Facility gives the Bank additional flexibility to offer sterling liquidity in an auction format against the widest range of collateral. Obviously this follows on from the coordinated action last week, but it underlines that the liquidity crunch that nearly took place carries risks for all non-US$ holders. The rumour that suggests that we came within a few hours of the total collapse of the short term funding market can only be reinforced by today...