Wednesday, 23 October 2013

Ed in a spin

I recently revisited my blog about Europe and surprised myself by how close many of the predictions I made have actually come to fruition – don’t know why that surprised me given the amount of research I did before writing that, but there we are.

Things have moved on since then though and I believe we have now reached an interesting, and pivotal point, in the fight for 2015.

One thing that has, to my mind, marked the current coalition out is their wish to avoid spin. Now I know my Labour readers will be shouting at the screen now but just hang on. A function of this rather unusual government structure is that two parties who have, for years, hated each other’s guts and said it pretty loudly, find themselves in bed together. Both want to retain their credentials and that means public spats, necessary withdrawals of certain policies and a generally more honest way of doing business.

I was (still am if I’m honest) a Tony Blair supporter but I know that both he and Thatcher before him had moved British politics into a more Presidential style. Both were huge personalities who cowed the opposition through their strength of rhetoric and an absolute ability to get their message across in a way people understood and could relate to. Like them or loath them you have to accept that they both won a series of elections and dominated politics during their time in office.

But the coalition is very different. Cameron isn’t Mr Charisma but he is a tough guy and it is the influence of Clegg and his strong LibDem ministers who keep the rhetoric at bay. The effect is that much of what the coalition have done gets lost in a rather more complex explanation of the policies and the reasons behind them. Most senior politicians are intellectuals, always have been, but this time around they haven’t managed to get their message across in anything like the terms that Thatcher or Blair would have done. And maybe that’s a good thing.

Miliband knows this. He and his shadow cabinet, when pushed are forced to accept that they would have done much the same had they been in power. The cuts to public spending are necessary although the targets might be different under Labour. The need to break the benefits culture that had grown during the soft Blair years is also necessary if we are to compete globally. Labour accept this whilst still complaining at every initiative – this, of course, is the function of opposition.

But things are about to change I fancy. The recent attack by The Mail on Ed’s dad (designed to open up a debate about Ed himself) rattled Labour to the extent that they made way too much fuss about it. They also misread the way the rest of the press pack would react. Sure there was outrage from the Guardian and Independent but it didn’t last. With press regulation now back in the spotlight the newspapers regrouped and stand together against the kind of political interference Mr Miliband would love and the press will simply not countenance.

In a speech yesterday Ed Miliband warned his supporters to get ready for a press onslaught. Her has rightly seen that the press, when anybody tries to gag them, stand together. The press also know that the Tories don’t support the press regulation proposals and are playing lip service so as to kick it into the long grass – they’ve said as much without admitting it.

The danger for Labour is that their newest policies can (unfairly) be described as state price controls and land grabs. On top of this the energy price fix is now being looked upon (by the Guardian no less) as a possible precursor to nationalization and that begins to raise memories of the horrific mess the Trades Unions created in the 70’s. Couple that with the dreaded use of the term ‘Marxist’ – Ed’s dad was one so why not he, the press will scream – and Labour will find themselves kicked into the long grass alongside the press regulation.

Ironically the polls showing for Labour at the moment mask the right wing division (Tory/UKIP) which is the only thing giving them a fighting chance of winning in 2015. Worryingly, Cameron is starting to address that issue and I believe by the time of the GE they will have removed the threat. Tough words from Farage are simply posturing to strengthen their negotiating position, he doesn’t want Labour to win and he certainly doesn’t want the blame for that in right wing circles to be laid at his door.

If the papers shout ‘Marxist’ and lay down a smoke screen of nationalization and state price controls, Labour are done for. No matter what they say the middle class – who consistently decide who is in power – will walk away and we will see the Tories taking the result by a whisker. Confusion in the middle ranks led to the coalition but there is appetite there for more of the same, a feeling that the LibDems curb the excesses of Tory zeal, so we could see another coalition. What we won’t see, unless Miliband can calm press speculation, is a Labour win.

I think the press will, as they have so often before, determine who wins the next General Election. At the moment it’s not looking good for Mr Ed.

Friday, 28 June 2013

Who really caused the recession?

On Twitter and elsewhere there is constant talk of the who is to blame for the mess we are in. The Tories blame Labour and vice versa, everybody blames the bankers and occasionally it turns out to be our fault.

What confuses me is that, whilst greed and avarice were certainly big factors in what happened there is one over riding principle that seems to have left everybodies consciousness.

If I apply for a loan or a mortgage the people I go to turn to credit checking agencies to see if I’m a good bet. They then look at my credit history; have I paid my way, have I got any CCJ’s, etc. in general am I a good risk and they ‘score’ me for the financial house I’ve gone to so they can make an informed decision.

Back in 2008 the banks were doing that with the bonds and stocks they traded. Certainly they were playing some games that were not right, messing with LIBOR and so on, but the main plank of what they did was to buy and sell securities using credit ratings to decide how much risk to take.

Two mighty organisations exist that gave them that information, both American and both making shed loads of money throughout the boom years – those companies are Moody’s, Fitch and Standard & Poor’s (S&P).

From about 2003 these three goliaths had given their AAA rating, normally reserved for a handful of the world’s most solvent governments and best run businesses, to thousands of mortgage backed securities. These ratings are specifically designed to predict default percentages

S&P, for instance, told investors that when they rated a particularly complex type of security known as a collateralized debt obligation (CDO) as AAA there was a 0.12% likelihood – one chance in 850 -  that it would fail to pay over the following 5 years. That made it as safe as a gilt edged corporate bond and safer than S&P now rates US Treasury bonds.

In fact, around 28% of the AAA rated CDO’s defaulted, that’s more than two hundred times higher that they predicted.

This is just about as complete a failure as it is possible to make in a prediction: trillions of dollars in investments that were rated as being almost completely safe instead turned out to be almost completely worthless.

Prediction is all about experience. When you don’t have it you should be cautious. The truth is the ratings agencies had virtually no experience of these securities as they were new and very novel. The ratings didn’t have any historical backing, they were just predictions using a computer model.

So banks around the world, trusting the ratings agencies did what they always do, they traded securities to increase the banks profits and allow us to get cheap credit. Until it went wrong……..

So you would think that everybody would have blamed these three agencies. But at the meeting of the House Oversight Committee on 23 October 2008 that didn’t happen.

The ratings agencies sang with one voice. They blamed the “housing bubble” and irresponsible US lenders, they said they didn’t see it coming. The ‘housing bubble” phrase appears in just 8 news accounts in 2001 but had jumped to 3,447 by 2005; it was discussed about 10 times a day in reputable newspapers and periodicals. Yet the agencies say they missed it.

The ratings agency market is quite an exclusive club. They are regulated by the US government and most pension funds require their rating before they will buy anything. As a result their revenues from giving out ratings exploded. Moody’s revenue from this market increased 800% between 1997 and 2007 and became the majority of their business. Their cozy relationship meant they had little incentive to compete on ratings accuracy nor to put too much effort into it. The agencies were paid by the issuer of the CDO everytime they rated one, even worse S&P gave copies of their ratings software to issuers so that they could manually calculate how many ‘bad’ mortgages they could add to a bundle before it went down from AAA.

By taking risk models and finding a mathematical way to include uncertainty into the model the agencies took highly novel securities and bundled huge amounts of systematic uncertainty into them, claiming the ability to quantify it; this was utter nonsense.

The end result was that the market lost confidence in these securities before the ratings agencies and the collapse that followed was uncontrollable. On the very day of the crash these agencies were still rating CDO’s at AAA.

Yet we saw no high profile resignations, no class actions by the banks and virtually nothing from governments anywhere in the world. It was if the engineers of this crisis got away scott free.

I make no comments about why that was, I’m as confused as the next man, but it just seems odd that’s all…….

Thursday, 27 June 2013

Liverpool Pride

Those of you who follow me on Twitter will know that I post ‘funnies’ some times. I never claim originality (although sometimes they are my own) partly because nothing in this world is original and because, some nights, I do uncredited ‘tributes’ to great comics.

Last night I posted some jokes by the great Jimmy Tarbuck who I was privileged to meet quite a few times during my time playing the club circuit. He was a great man and had the ability to laugh at himself and his home town of Liverpool.

What I discovered last night was that his fellow LIverpudlians lack that grace and style.

As a follower of Old Holborn I’ve witnessed the invective and downright unpleasantness of some LIverpudlians but I didn’t believe they couldn’t have a laugh. Over the past year I’ve posted jokes about Geordies, Scots, Welsh, Londoners and a lot about my own home town of Bradford – never had a reaction other than “lol’”. Why is Liverpool so different?

The joke was:

“What do LIverpudlians use for protection during sex …… a bus shelter”

to be honest when I was thinking of posting it I was going to change the city, partly because I know how touchy they are, but then I thought, as it’s a jimmy joke that would be wrong.

Liverpool people seem to see themselves as victims, they seem to think the whole country is against them. This from a stunning, vibrant city that has brought us great music, great characters and a ‘feel’ that is second to none.

I actually love Liverpool.

But it’s people have this issue with life and seem to lack any confidence; because it’s confidence that lets you take it on the chin.

One of the people who unfollowed me was @MarkMoraghan a man who could hardly be described as unsuccessful or under confident (you don’t make it as an actor if you are) – so this defence mechanism they seem to have is spread across all types.

I have many celebrity friends, none see the need to defend their place of birth in this way. Bradford takes it on the chin every day with jokes about its demise, the people just keep smiling.

So please Liverpool. Know that you are a great place, a great people with an acute sense of humour, and start being a bit more confident when it comes to outsiders poking fun. Stop seeing defence of your city and its people as a cause, stop seeing yourself as victims.

A bit of pride, a little less solidarity and a realisation that we all make fun of different regional stereotypes (Christ, think how obsessed folk from Norfolk would be if they had your sense of inadequacy!) and you’ll be better for it.

Tuesday, 2 April 2013

Thinking about Europe Part Three

In the first two parts of my investigation into all things EU I tried to lay out the facts.

I took those who read it through the “how we ended up in” story and how things have changed since we joined the Common Market all those years ago. The Maastricht Treaty which changed it over to the European Union and the way in which it now ‘earns’ its money and where it spends it.

The fact is (as Nigal Farage delights in telling us) that almost all of that stuff weights against the UK and leaves us wondering why we got into this mess in the first place. But the fact is we did, we enjoyed 10 years of amazing growth as a direct result of being in and we slipped into a sloppy routine of relying on the EU to buy our exports and feed us.

So whilst the people of Britain now have a thirst for independence again (not as big a majority as UKIP would have you believe but still a majority) there are some practical things to think about here.

My little investigation was to help me. I like to understand things before I start supporting them and the blind simplicity of the UKIP argument (coupled with the fact they get very close to being racist) meant I couldn’t just jump on their, or anybody else’s bandwagon without thinking it through.

It is no coincidence, therefore, that this third part has taken time to write and publish.

It is undoubtedly true that we don’t belong in the EU; few British people describe themselves as European, we operate very differently (we are instinctively free trade people, they are socialists who seek the collective good) and many Europeans resent the artificially high influence we have on global affairs – derived from our history certainly, but still a big factor in the UK economy.

Little has been said across Europe about the massive efforts the UK has made to refocus its export trade since 2008 either. In 2008 56% of all UK exports were to EU countries; in 2012 that’s dropped to 37% and it’s still going down. True, UK exports as a whole have declined massively and some of that fall is simply by us taking up the slack in our system elsewhere in the world, but the strides made in India and Brazil are quite extraordinary. Britain is preparing to leave and the EU knows it.

But my paper isn’t about what other people think, it’s about where I stand. And that’s a tough one; in fact it’s much tougher now than it was when I started this little exercise.

I believe that both the Conservatives and Labour will finish up putting a referendum in their manifesto’s. I say this because whilst it is certain the Conservatives will do it, I think the issue will so polarise the next General Election, that Labour will realise that if they don’t offer one they’ll lose purely on that issue. What seems certain to me is that by the time of the next General Election things will be a lot closer than they are now and the departure of David Milliband will push the Labour Party more to the left and increasingly unelectable; so they’ll need every advantage they can gain and leveling the playing field on Europe will be one such advantage.

I also think we will vote to leave (as do all our politicians) but I think it will be close. I’d venture to guess as close as 1% either way perhaps. And that’s when the issues start.

So here’s why I’ve been mulling this over. You see if we were to leave and turn our back on the EU we are finished. Our economy would collapse in on itself. There is too much interplay between us and continental Europe and you cannot just walk away from that.

UKIP says we should re-establish the ties with our Commonwealth partners and create a Commonwealth Free Trade Association. Quite frankly it’s bunk. First, it presumes they want to trade with us but more importantly the key question must be if there is anything to trade.

Australia is now part of the Asian Trade Association and has publicly stated that its future lies there. India is making fantastic progress in being the first country to win a free trade agreement with China; what on earth do we have to take to that party. So whilst there is undoubtedly trade there, we will not be at the centre of some huge mothership steering the Commonwealth to greater glory.

But there are two options open to us. Whist Obama sends his Ambassador to tell us that leaving the EU would damage UK/US trade, the Republicans in the Senate have already told our leaders that they want us to be part of NAFTA (The North American Free Trade Association) and have outlined why they want us in and the benefits for us.

On another tack, this thing exists as a loose formation called the NORC (Northern Rim Countries). It includes Russia, Norway, Canada, USA and Iceland). These countries have been quietly, and without conflict, slicing up the Arctic where the largest energy reserves on the planet currently sit. Furthermore, with melting permafrost, there are huge on land reserves in Canada and Russia that can be explored. Energy will be the biggest currency of the next 50 years (just like it was the biggest of the last 50 years) and I don’t care what anybody says, the world has a thirst for oil and gas (not wind) and will continue to do so. The NORC will become the worlds richest area.

The Republicans know this and, when you look at a map of the NORC territory we, the mighty UK sit right in the middle of it; we don’t have any of the reserves but we sit strategically in the middle. And the Americans and the Russians trust us – opportunity knocks!

I said in my last paper that the EU has failed to make any free trade arrangements on the world stage. In fact, the Doha Round which was supposed to open the world up to free trade, was scuppered by the EU. There are many countries within the EU who know they need trade agreements outside their own boundaries but one, France, fears agricultural destruction and agriculture is always a key to free trade. Each time the EU tries, the French kill it and they will continue to do so as they simply cannot afford for their farming industry to be opened to competition. The French grip on the CAP is well known, they promote inefficient farming to preserve their way of life, and expect the rest of Europe to pay for it.

So my conclusion is this.

In qualified form I believe we will be better off out.

We cannot join EFTA like Norway and Switzerland as this is a truly restrictive outfit which is forced to take all EU legislation without any representation in exchange for trade openings. We do need to negotiate with the EU to keep trade entry points but we won’t get much.

As exit is inevitable in my view we need our politicians (behind the scenes I accept) talking to the Republicans in the USA, the Russians and the Canadians. We need to be prepared.

Recent trade visits by David Cameron are opening up China and India but this will never be anything other than a small part of what we need to grow. But imagine if our financial services products were deregulated in the USA, if our foreign exchange became the hub of NORC trade, if our technology could find investment in exploration and manufacture in a favourable market, then we would be cooking on gas (forgive the pun).

There is a future out there, without the stranglehold of the EU where the UK can be great again. Perhaps Scotland will by then be crippled inside the Eurozone, but England has a future outside of Europe.

So, in the words of that detestable Scots Dragon “I’m out”.