Monarchy reform: where's the bigger picture?

Just attempting a blog post while on holiday in a surprisingly sunny Wales, using the Google G1 phone. This is a bit awkward to use for long posts as while it offers a full QWERTY keyboard it's tiny, so no writing "War and Peace on this device. You'll probably have to put up with typos etc for a few days. And posting a link is fiddly, so I wwon't bother much.

Anyway, just to say that Gordon's conversations with ol' Thin Lizzie from House of Windsor about changing the rules of succession and abolishing the rule that says the monarch can't marry a Catholic are fine as far as they go but do miss the point a bit. For sure, the current rules are discriminatory. But the whole concept of monarchy is pure discriminaation based on birthright. The French and the Americans sussed this 200 years ago. So why. Are we still scuttling around in the dark ages? Abolish the whole caboodle and let's have president Jade Goody or whoever the living equivalent is. Preferably chosen by a tv phone-in. I like it. Time for fine home-cooked mexican food and farm perry @7% abv...

Dean Stockwell's finest hour

Watched the finale of Battlestar a couple of days back on iTunes.

A feature-length special: 2h20m of BSG. Split into 2 parts (a single episode and a double episode) when aired on Sky (in the UK) and the Sci-Fi Channel (in the US), idiotically. Split into 3 parts on iTunes.

In the absence of spoilers, what to say? Well, IMHO, it's great. My favourite part is the last contribution of Dean Stockwell, about 2/3 of the way in. You'll know it when you see it.

Stockwell really needs to have his own series - a bit like Larry David in Curb Your Enthusiasm.

He'll be back, of course, in the prequel movie The Plan, scheduled for later in the year. Prequels are difficult things to get right (hello George Lucas) for obvious reasons: dramatic tension tends to disappear down the plughole when you know what's happening next. (Which makes it strange that people still watch Manchester United, but there you go...) That's not a hard and fast rule though - I do consider Twin Peaks: Fire Walk With Me one of the greatest movies of all time, despite being a prequel.

Right. Now BSG has finished I won't be watching much TV so I really must get back to writing about the economy, which is in something of a death dance these days... I'm on holiday next week but the Google G1 phone is doing it for me in terms of blogging while away, so hopefully expect to see a good post rate. Speak soon.

Nice BSG review with particularly fine spelling mistakes

Still on a Battlestar Galactica tip: nice review of the series from Richard Vine of the Guardian here.

Complete with classic Grauniad spelling mistakes... 'cylon' misspelt as 'cyclon' twice. Isn't that a kind of washing machine? Well, a toaster was used as a plot device in Season 1...

Back to the economy forthwith.

Battlestar: just 2 episodes to go

The presence of Battlestar Galactica Series 4.5 (which would more sensibly be known as "Series 5" given the gap between the first and second halves of Series 4 due to the 2008 writers' strike) on iTunes means that it has been possible for those of us who don't want to pay subscription money to Rupert Murdoch to watch the shows without having to wait months for the DVD release, or resorting to P2P sites.

Given that I'm pretty busy with work, allotment gardening, music and writing stuff like this, it's got to the stage where Battlestar is pretty much the only thing I watch regularly on TV (well, actually as a download on a monitor, but the only thing intended for TV that I watch anymore.) And I will sure miss it when it is gone.

I won't say much about series 4.5 due to not wanting to give away spoilers for those of you who haven't seen it yet. But, overall, this is up to the standard of the rest of the series and I can't wait to see the final two episodes (Daybreak Part 1 airs tonight in the US and on Tuesday in the UK, with the double-length Daybreak Part 2 airing a week later). I'm not giving much away by saying that the mood of these final episodes is pretty grim - this show started dark and has gradually dimmed to pitch black. Star Trek it ain't.

If there's been one slight problem with the final run of episodes (and I'll return to this in more detail once the whole thing is out on DVD and I'm less worried about spoilers), it's that there has often been so much plot to get through that some of the episodes have had to rush certain things and keep certain elements of the story more offscreen than would be ideal. It's a huge contrast to Season 3, where the second half in particular seemed to be stretched out to turn 13 episodes' worth of material into 20. This time round they could have probably supported 13 episodes rather than 10 in this half of the season. I guess budgetary constraints and network programming were the reasons they decided to stick with 10 (although if you include the prequel The Plan which will air in a few months' time and the fact that Daybreak Pt 2 is double length, Season 4.5 is effectively 13 episodes long anyway...)

The slightly rushed feel of this season is a minor problem but it's been a bit compounded by weird editing decisions. One recent episode (I think it was "Deadlock") featured around six or seven shots of Admiral Adama walking round a particular part of the battlestar (I won't say what's being done in the scenes as it gives away too much about the likely conclusion of the show). But it was extremely repetitive and a weird use of scarce screentime when there were more important things that could have been shown instead, but presumably had to be cut for time (or maybe there wasn't the budget to film them?)

Series creator Ron Moore's podcast commentaries (also available from iTunes or from the website at SciFi.com) suggest that several of the episodes from this final batch will be extended when the DVD is released later in the year, and that should help a lot.

The main 'problem' with Battlestar, if one can call it that, is that other recent sci-fi series look extremely mediocre in comparison. I tried watching a couple of episodes of Star Trek: Enterprise on Virgin 1 the other day and they were almost unwatchable - it looked so clunky and plastic next to BSG, despite being only a few years older. Partly that may be just because Enterprise was crap from the word go - I dunno. Maybe it was Scott Bakula - Quantum Leap always sucked as far as I was concerned, although Dean Stockwell was great (and he's great in Battlestar too.

Certainly the trailer for Star Trek XI which I saw when we went to see Watchmen earlier this week (and more on that in a later post hopefully) looked good, although a good trailer is absolutely no guarantee of a good movie (and indeed vice versa).

Well, I hope you enjoyed reading about Battlestar - I just HAD to blog about something other than the global economic crisis just for a change, to stop myself going nuts.

A small beaker of electoral death

Last night's Political Spot on Channel 4, presented by Labour, was the weakest party political I have ever seen. It was a spoonful of electoral suicide. I can't imagine that anybody - even the people who appeared on the broadcast - came away more likely to vote Labour. A lot of people probably came away with a steely resolve not to vote Labour.

First up was the reliably charismatic (ha ha!) Alistair Darling. Followed by everybody's favourite cabinet minister, Hazel Blears. And then Geoff "I was in the front line of the Iraq war... at least at the despatch box" Hoon. All of them spouted statistics about extra public services which people will either ignore or won't believe, whilst attacking potential spending cuts by the Tories which sounded microscopic to me. (Figures being mentioned were mostly in the region of £100-£200 million, which is neither here nor there in a public spending sense.) It's come to a desperate pass when Margaret Beckett is the best thing about a PPB.

Poor old Margaret... overlooked for the party leadership in 1994, immortalised in the 1970s volume of Alan Clark's diaries as "sexy little miss-horse-face from Lincoln" (or some similar compliment/putdown). Doing the housing minister brief she must be reminded of the words of Ozzy Osborne from Decline of Western Civilization Part 2: The Metal Years:

You meet a lot of people on the way up: don't f*** with them 'cos you meet them on the way down as well!

Actually, that quote could apply equally to the New Labour project as a whole. I watched some of the Dispatches programme that followed the PPB, until the Taxpayers Alliance (actually the Taxcutters Alliance) got too much exposure and I had to switch over. It was basically attacking government waste - an easy target to be sure. Journalist Jane Moore, who fronted the programme, was right to point out that the NHS IT scheme is an expensive failure, that MoD procurement is a disastrous mess, and that the tax credits scheme was (at least initially) an administrative fiasco. I hope the programme then went on to talk about PFI, the biggest public sector financial scandal (and potentially the most long-lasting) of the lot. But I don't know 'cos I didn't make it that far in. Frank Field was given a lot of interview space, which is always unfortunate, along with Edward Leigh from the Public Accounts Committee - who despite being a right-wing Tory, is actually a lot less annoying than Field. But that's the way of these things.

This far into a period of government term it's possible to get a hell of a lot of dirt on any administration and make most of it stick. But by making bad mistakes on some public spending projects, and failing to curb obvious pork barrel waste in others (why on earth did the MoD need 75 plasma TVs, for example?) the incompetence of New Labour makes it much more likely that a Conservative government will strip away all the spending increases that have actually been useful - tax credits, the extra money for health and education (certainly there have been mistakes there, but overall both services are in a far better shape than in 1997), infrastructure funding - and get us back into the same underfunded mess we'd reached by the 1990s. And if that happened, it would basically be New Labour's fault. For sloppiness and incompetence.

But Labour sure as hell ain't gonna get out of the present poll slide with lame offerings like last night's. Maybe an accommodation has already been reached with the Tories: nice pensions and the chance to chair a review or two for the senior ministers, the opportunity to defect for the New Labour vanguard (John Hutton, anyone?) and the chance for Blairites to say 'I told you so' as Labour becomes a bankrupt husk in opposition. It certainly wouldn't surprise me.

Say no to cheap punk bandwagon jumpers

The Telegraph's current headline (as I write) is a lame-as-hell interview with ex-Australian PM John Howard.

For those who don't remember Howard (and there will most likely be many of you), he's a nasty little wanker of a politician who stayed in power in Australia for 11 years by riding out a boom driven by the Chinese demand for Australia's raw materials exports whilst pandering to the worst xenophobic instincts of the Australian voters and imposing fascist industrial relations laws. When he was swept away by Kevin Rudd's Labor party in 2007 it was the best electoral night in years (until the recent US election).

Suddenly he's trying to sound like someone with a clue on economic policy, but sadly he doesn't seem to have even the most basic grasp of economics. "It's dangerous to go too far into debt" - certainly, but the alternative of cutting back spending would get us into Herbert Hoover 1930s territory, and that's even worse.

His main policy suggestion in response to the slump is pure Reagan/Thatcherism: let's deregulate the labour market even more - making it even easier for big business to exploit workers than it already is. But John: large chunks of the industrialised world have already been following these right-wing policies for 25 years at least. And it's led to economic disaster.

What's perhaps saddest about this is that a broadsheet national newspaper thought this was a strong enough story to lead on. What next? Robert Mugabe on economic policy? Or maybe an interview with the North Korean leader Kim Jong-Il, just re-elected with 100% of the vote. They have about as much to say about the current economic situation that's useful as John Howard does. And that's the sad truth.

Say Hello to Quantitative Easing (long but worthwhile)

..or "printing money" as it's called in the media, which is not completely accurate, but close.

Today the Bank of England lowered interest rates to 0.5% - almost the practical minimum (a negative interest rate doesn't make a lot of sense, although as commercial banks don't normally lend at base rate but something above base rate (quite a lot above base rate at the present time), I guess you could have a negative base rate but maintain a positive interest rate for lenders in the real economy.)

But the interest rate cuts seem to be doing very little to reflate the UK economy (although they are drastically reducing the amount of savings in the UK, which raises the question - where are all these withdrawn savings going? Under mattresses) so the B of E is going to use quantitative easing (hereafter known as QE) to expand money supply directly.

What the B of E will do is to buy up bonds (probably some mixture of corporate and government bonds) with money it has created out of thin air. This expands the amount of money in the economy whilst reducing the supply of bonds. The idea behind QE is that the addition to the money supply makes banks more likely to lend money.

Will this work? It depends crucially on whether the factor limiting bank lending at the moment is a lack of availability of funds to lend. I would argue that it isn't - they have already had billions of pounds of bailout money injected to lend with. The main factor inhibiting bank lending is that banks think they will make a loss on any funds lent out because the economic situation is looking so grim. QE is not going to change that. So it's not going to reflate the economy.

Having said that, QE may have a role to play in preventing a very bad situation getting even worse. That's because it should prevent deflation (i.e. general falls in the price level) by expanding the money supply. Deflation is bad news because it makes consumers less willing to spend - because things are likely to be cheaper in future, so you might as well save your money now (even if you've got it under a mattress!) and buy later. This removes more demand from the economy and can depress the economy still further.

QE directly increases the money supply and so should increase the price level. This is not a cast-iron relationship but the basic 'quantity theory of money' is an accounting identity which states:

M x V = P x Q

where M is the money supply, V is the rate at which money changes hands in the economy (on average), P is the price level, and Q is the real volume of transactions (e.g. real output).

Now, QE clearly increases the money supply. So will it increase P? It depends on Q and V. Assume that Q - real output - at least isn't lowered by QE more than it would otherwise be falling. In that case everything depends on V. If banks just sit on the extra money created by QE that could decrease V and offset the increase in M, leaving P unchanged. But a full offset is unlikely. Therefore, increased M should feed through to P.

However, as the monetarists discovered in the 1980s, there is a catch. The previous paragraph assumes that M can be clearly and uniquely identified as a quantity, which just isn't the case. M isn't just notes and coins in circulation. Equally important in M, if not more so, is 'wide' money - what used to be called "M3" and "M5" in the days of monetarism in the 1980s - which includes the supply of credit and various liquid assets (indeed, 'credit creation' is really 'wide money creation'). The 'credit crunch' has massively reduced the supply of 'wide money'. So QE will only have an impact on 'wide M' (as opposed to 'narrow M') if it gets the banks lending again - which, as I indicated earlier, doesn't seem that likely to me. Having said that, the direct impact of increasing narrow M should be enough to avoid deflation in itself if pursued vigorously enough.

(An interesting side issue here is that the impact of deflation on spending only occurs because money can be held as cash, which by definition has a zero nominal change in value over time. If cash was abolished and the government decreed that we had to have our money in various types of bank account, the interest rate on which could go negative, then the incentive to hoard money in deflationary periods would disappear.)

So the overall verdict is that QE looks a bit dodgy. What's the alternative? Well, the basic problem is that banks don't want to lend. So take 'em over and MAKE them lend! It's all about restoring confidence - at (metaphorical) gunpoint if necessary. But the govt doesn't have the willpower to nationalise large chunks of the financial sector - so we're left with the current mess. Expect little or no impact on the real economy from QE - meanwhile, zombie banks continue to drag us all down with them...

"more bailouts may be required" in the US... aka "prolonging the agony".

Bad news going to worse news in the States... after $750 has already been committed, Ben Bernanke says today that even more banking bailouts might be required.

Where does this end?

Whilst the Obama adminstration's $3.5 trn budget (if it can be passed - a specific post on that later in the week) looks pretty good, the bailout just looks like it's throwing bad money after bad now.

Liquidate the duff banks, nationalise the infrastructure and start again. It's the only way.

I'm not going to be so naive as to say that the continuing slides in global stock markets are being caused by the continual extension of the bail-outs, but it probably can't be helping any.

The significant risk of downside for taxpayers in the deals that are being struck by the US government over AIG - and by the UK government over RBS and Lloyds Banking Group - are also contributing to the grim mood and the general feeling that we are plumbing some kind of bottomless pit of public money. Our old friend Paul Krugman points out the problems of the AIG deal here. Meanwhile there's a fairly measured analysis of the RBS deal by Philip Aldrick of the Telegraph here.

Longing for the days of "Dow 36,000"

Anybody remember the 'classic' book Dow 36,000 by Glassman, Hassett and Hassett? Available very cheap on the marketplace at amazon.com these days...

Basically the book was the high water mark of the eyewash that people were touting around 10 years ago saying that we were in a new technological 'golden age' and stock indices would rise by 10% a year in perpetuity, or whatever.

It's easy now, of course, to say that this is a load of eyewash. Not so easy when stock indices are rising by 10% a year and you're being labelled a contrarian for saying that it's a bubble and it might not last.

It's just the same as the poor sods who are saying now that wait a minute, the Dow is below 7,000, and we might be headed for 3,600 rather than 36,000, but then again we might be about to turn a corner. When the market is in 'herd behaviour' mode (which seems to be pretty much all the time except at the exact point there's a crash), nobody wants to know that things might be slightly more complex.

Your best option for long term investment really is what the folks at fool.com have been telling you for years: get a tracker fund, make sure the annual management charges are as low as possible, and just invest regularly. Low maintenance, low cost. The only thing whizzbang active fund managers are good at is creaming off extra charges at your expense.

Anyway I intend to get hold of a copy of Dow 36,000 as I suspect in the light of current events it will read like a comedy classic. (Very black humour, of course...) with apologies to anybody out there who's lost their shirt on the stock market. But you sure as shit won't do it again. (Or will you? Because that's what they said after the 2000 'dot com' crash...:-()

Definitional trouble for Ed Balls

Now here's an interesting one: Ed Balls thinks lotteries are unfair.

I think that's, by definition, wrong (unless the lottery is rigged, of course). Arbitrary, yes. Unfair? No more than tossing a coin.

Whatever the arguments against lotteries, 'unfairness' sure ain't one of them.

What's really unfair, of course, is kids being admitted to one school rather than another based on where they live, how intelligent they appear to be in a test, or what religion their parents claim to practise.

But these things don't piss off Daily Mail readers as much as lotteries, so Ed Balls won't mention them, of course.

If this guy turns out to be the next leader of the Labour Party then they really are up shit creek without a paddle.

Dead banks walking

After some thought, I've come to the conclusion that Joe Stiglitz is right; we should let the duff banks fail and start again - probably by taking over the infrastructure (branches etc) at rock-bottom prices, giving jobs to the rank-and-file staff and firing the directions.

The RBS results today are a disaster and all the UK and US adminstrations seem to be doing at the moment is providing an open-ended lifeline to keep these zombie banks operating on a large enough scale to leech huge amounts of cash from the taxpayer, but not doing anything to reform the basic banking strategies. Indeed, RBS have been relentlessly taking the piss - Fred Goodwin's £650,000 per year pension (at age 50!) which RBS were NOT contractually obliged to give him according to Robert Peston (they could have sacked him, and should have done) are just the icing on a very toxic cake.

In a way, Goodwin and his ilk are doing more to advance the cause of the hard left in UK politics than anybody else in recent memory. Now that the directors of the failing banks have been seen to be taking the piss in such a spectacular manner - at taxpayer expense - the logical foundations of the current economic system, have come crashing down. The arguments for a truly radical solution to the current crisis grow stronger with each new revelation of the incompetence and arrogance of the bankers.


Maybe we need some kind of retrospective taxation on remuneration and bonus packages for the financial sector - where banking firms have subsequently collapsed, senior managers should be made to repay their bonuses and pension pots. Probably unworkable but it's hard to see what else would sort out people like Goodwin. A revolution would probably do the trick, but only with a lot of collateral damage in the process. Increases in income tax at the top end, and some kind of wealth tax (as was mooted in the 1970s) seem essential. Meanwhile, RBS should just be allowed to collapse (subject to protection for individuals with savings in RBS or associated banks) - and probably Lloyds Banking Group as well. It seems to be a choice between that on the one hand, and a liability of several hundred billion pounds for the taxpayer on the other. And I don't see why Joe or Joanna Public should bail out these wankers anymore. Time to apply some Strict Market Discipline...

Laugh? I nearly bought the Telegraph

A couple of very amusing items on the Telegraph website:

1. Corby rail station has finally opened - but they only have one train a day (going in one direction). Apparently £17 million has been spent on the rail station but no-one remembered to buy any new rolling stock to actually, y'know, get trains running to and from the station. It's like a Soviet-style planning error.

2. The Telegraph is worried about the 'coping classes' - not Julian cope fans, unfortunately, but nice middle/upper class people who apparently deserve better than to be affected by the recession like the rest of us. Apparently,

According to an analysis by the Office for National Statistics, architects, lawyers, tax advisers and commercial pilots are among the fastest-growing sectors for claims of jobseekers’ allowance. It’s a crushing comedown for those who have worked hard to establish high-flying careers and take pride in their self-sufficiency.

Yeah, because only 'professionals' work hard, don't they? If you're in a working class job it must mean you're a feckless moron who deserves to starve to death. Not like those fine, morally upstanding banking executives.

One good side-effect of this recession is that maybe some of the tossers who voted for successive govts who emasculated the unemployment benefit system, from Thatcher onwards, will suddenly discover that the system is no longer fit for purpose and only gives them a fiver a week, or whatever. It makes the heart bleed.

Of course a lot of innocent people are going to suffer badly as well, which is unforgiveable. But at least we'll take some of 'middle Britain' down with us.

Oh well, this kind of stuff provides some minor amusement while we're waiting for the latest piece of idiocy from Simon Heffer.

In (at least partial) support of John Sentamu

Most Giroscope posts on the topic of religion have tended to read as if they were drafted by a slightly toned down version of Richard Dawkins, but I wanted to say a few words in (partial) support of the Archbishop of York, Dr John Sentamu, who said today that Christians are regarded as mad by society.

Sentamu was one of the most vocal critics of the BBC's shamefully callous and irresponsible decision not to air the DEC's Gaza aid appeal a few weeks back, and his denunciation of the BBC was based on pretty much exact the same arguments as my own.

I also find a lot to admire in his latest remarks. He says that Christians are regarded as mad by the rest of society because "they are motivated by charity and compassion rather than the relentless pursuit of money".

Scrub out "society" from that sentence and substitute "the people who call the shots in capitalist society and all of us who believe their lies" and it's 100% correct.

John Sentamu is absolutely right that the relentless pursuit of profit at all costs is a problem - but this ain't a "Christians vs non-Christians" issue. Many Christians - or at least people who call themselves Christian (and who is to say what the difference is?) are relentless pursuers of profit. Many non-Christians, either from other religions or atheists, aren't. (To be fair, Sentamu does say "it is not as if we are the only ethically minded people on the block - far from it".)

In the present crisis of capitalism we need everybody who is opposed to the lunacy that has brought us to the present economic collapse - religious people, non-religious people, and those who haven't a clue - to stand together. But we need to stand together because of our common economic ideology, and not divided by this or that religious belief. That is the key issue. If Christian beliefs help get you to the conclusion that capitalism is morally bankrupt, then bloody great - join the club. But it sure ain't the only way to reach that conclusion.

On a slightly different issue (although I'm not sure if Sentamu actually discussed this in his speech or if the Telegraph just shoehorned it into the report as part of its latest hobbyhorse) I don't think it's right that people should be sacked for talking about their religion in the workplace. I can't see how it's hurting anyone if someone tells me they're praying for me, for instance. Free speech, and all that.

New opinion poll makes grim but also interesting reading

A new opinion poll from the 'Sindy' confirms the post-Xmas collapse in Labour's popularity as the gloss comes off the October bailout. Recent news of an £11bn loss by the HBOS (part of the 40% state owned Lloyds Banking Group) hasn't helped none... taxpayers will certainly be wondering just what they've been put on the hook for.

The poll shows Labour down to 25% - pretty much where it was last summer - with the Tories on 41% and interestingly, the Lib Dems up to 22%. The Lib Dems had been running at about 12% before Christmas and it looks like that 10% improvement is entirely due to Vince Cable, who continues to operate as the best economic brain in Parliament - light years ahead of Brown, Darling or Osborne. If this is how well the Lib Dems are doing with the semi-useless Nick Clegg running the show, it's interesting to speculate how well they'd be doing if Cable was the leader.

The poll rates the Tories very poorly in terms of confidence in their ability to deal with the economic crisis, and it seems pretty clear that that 41% rating is very soft. Things could yet improve further for the Lib Dems, although they would need to be into 35 - 40% poll ratings to make serious electoral inroads given the first-past-the-post electoral system. Probably unlikely, but as the economic crisis gets more severe, if Cable continues to impress, anything is possible.

Other news today (in the same article as the poll) is that Labour welfare adviser David Freud - an ex-banker (that description really inspires confidence, doesn't it?) who advocates privatisation of the welfare system (a measure which the government is struggling to implement) has defected to the Tories. Expect this to be just the start of a trend, although I would imagine most defections will occur after the next election rather than before. The most obvious candidates to go to what Tony Benn calls 'Blue Labour' will be ultra-Blairite MPs who have little grounding in the culture of the Labour party - John Hutton being the most obvious example, and maybe James Purnell (although he may stick around after the election for a shot at the Labour leadership - god help us). But probably not Hazel Blears (why on earth would the Tories want her? They will presumably be trying to get re-elected.) And probably not Peter Mandelson, although with Mandy anything - short of a move to UKIP - is possible.

Of course if the recession becomes a depression it could well engulf the Tories' attempts to get re-elected if they do win in 2010 (still by no means certain, whatever the polls say). Assuming that some kind of functioning opposition survives and we don't just get a re-run of the early 1980s. I haven't really thought much about at might await Labour in opposition (apart from the party going bankrupt and having to be restarted, which is pretty much certain) but the more the polls head in their current direction, the more it looks like I'm gonna have to address that issue. One for the next couple of weeks.

The whistleblower who got it right... and got sacked for his trouble

Very interesting interview on Channel 4 News today with Paul Moore, an HBOS executive who got sacked by HBOS CEO (and now deputy head of the Financial Services Authority) Sir James Crosby when he expressed the opinion that the bank might be over-stretching itself.

Of course, we now know he was absolutely right. However, back in 2003 when this happened, the consensus opinion was that people like Moore were over-cautious pessimists, and people with his views were probably hounded out of many institutions for their trouble.

Of course, now everybody is rushing to join the other side of the bandwagon. For example, today's Bank of England Inflation Report forecasts that GDP growth in 2009 will be minus 2.9 per cent. That's a post-war record... in the wrong direction.

There's a pattern to this herd behaviour and unwillingness to speak out. A major problem with market sentiment in the financial sector - typified by the 'animal spirits' described by Keynes as far back as the 1930s - is that the rewards to employees who "run with the pack" - with making an "average" assessment of how markets are going to perform - are pretty good. Compare that with the risk of falling flat on your face - or getting sacked for being "out of line" if you take a position contrary to the overall market sentiment - and it's not surprising that so few financial decision-makers 'rock the boat'. In other words, being a Paul Moore makes you a troublemaker. Why bother when you can play it safe and get a cushy bonus for doing so (provided your bank, hedge fund, commodity trading - or whatever - performace is close enough to average so as not to be really crap?


For a profession that is often caricatured as the epitome of rugged free-market individualism, it's actually probably one of the most collectivist and unimaginative parts of the economy (apart of course from the people who were designing ever-more complex financial instruments for parcelling up and selling on risky assets, who did the job so well that many institutions still seem to have no clue how large their bad debts are. Great job, guys.)

We can certainly reform financial regulation, but you can't really regulate market sentiment - which may be one of the biggest problems contributing to the crazy market swings we've seen over the last decade. So, perhaps time to junk the system completely and try a less capricious approach? Certainly food for thought.

Economic crisis: how far into the abyss are we?

A very good article on the Telegraph site from Ambrose Evans-Pritchard, probably their best columnist. He points out that debt deflation is now occurring in the US. This is a phenomenon where a fall in the price level increases the real value of debt - and hence increases its burden on the debtors. (The debt deflation hypothesis was formalised by the American economist Irving Fisher in the 1930s: Steve Keen's excellent book Debunking Economics (available fairly cheap as an online download here contains an excellent explanation for the non-technical reader.)

The yield on 10-year Treasury bonds (a good benchmark the cost of government debt finance) has risen from 2 per cent to 3 per cent over the last six weeks, despite the initial Paulson bank bailout. And the US price level is falling.

A large increase in debt servicing costs could blow a hole in the reflation strategies which most countries are either toying with or have already initiated. It would seriously increase the risk of governments "doing an Iceland" and defaulting on their debt payments - which is a reinforcing feedback loop, since an increase in the risk of default makes lenders more nervous about lending to governments which in turn increases the risk of default... etc.

But on the other hand, failing to reflate means the economy is likely to just drop of a cliff, with huge losses in output which mean governments would have to borrow more just to keep current levels of public spending going (because of the decline in tax take). It's a real Catch-22 situation.

Is there a way out? There are two possible options. One is the route of just "printing money" (it's slightly more sophisticated than that... the central bank purchases debt, which expands the money supply).

BBC economics editor Stephanie Flanders's Stephanomics blog points out one risk with printing money (or 'quantitative easing' as it's sometimes called): there's no guarantee that an increase in the 'narrow' money supply (notes and coins plus banks' operational balances at the Bank of England) will translate into an increase in the broad money supply, which is what would really drive a recovery. Banks need to lend for that to happen. However, if the Government nationalised the banks - or regulated them into lending money by some other route, although without nationalisation that's difficult - we'd soon see broad money expanding, so I don't see that as a problem.
This may be an option that receives a lot more attention if things really are as bad as Ambrose Evans-Pritchard points out (and they may well be).

Otherwise, the options of letting the banks fail, and starting again under state control or regulation, becomes more attractive the more the costs of servicing the debt which is being incurred under the current policy increase. I'm starting to lean towards the idea that politicians everywhere need to collectively throw their hands up and admit that the game is up, we've been operating with a flawed system for the last 30 years, it's led us down a blind alley and we need a completely different approach. That different approach will have a far greater role for public ownership and regulation than we've had in the financial free-for-all of the last decade. The problem is that the rather disappointing progress of the bailout legislation in the US (which I'll say more about tomorrow) is, as Evans-Pritchard points out, doing very little to plug a deflationary vortex into which the whole world is inexorably being dragged. Things really are f***ed out there, and we are in the abyss. Enjoy the view.

Time for politicians to retaliate against the idiots

All the morons seem to be out in force this week. First we had Carol Thatcher in the back room of The One Show calling a mixed-race tennis player a "gollywog" and apparently thinking that was perfectly acceptable language to use in a social context.

You're not in the f***ing Conservative club now, Carol. This isn't "In the Line of Beauty".

Next, Jeremy Clarkson describes Gordon Brown as "a one-eyed Scottish idiot". Two-thirds of that one, at least, is correct... a few months after making a sicko joke about truck drivers murdering prostitutes.

Was the Beeb right to sack Thatcher? I think if she'd apologised for the remark then a "two strikes and you're out" warning would have been OK, but given that she didn't, her position on the show was untenable. I just can't understand the mentality that thinks comments like that are OK in this day and age. The same mentality, presumably, that thinks the Mail and the Express are decent newspapers...

Clarkson survived the prostitute gag and will no doubt survive his latest slur on the PM, and I'm kind of glad about that because the guy is such an easy target. Since the departure of business editor Jeff Randall for the Telegraph and Sky News (where Jeff seems to be carving out a niche as the UK's answer to Rush Limbaugh), Clarkson has been the major representative for the right-wing "man on the street" viewpoint on the BBC. He's no fool and can be quite witty but he's also so utterly ludicrous on so many levels that I can only conclude that the Top Gear producer is a New Labourite who keeps Clarkson on to discredit the Right. I mean, this guy probably watches The Sweeney and actually wants to be like Regan and Carter. He watches Life On Mars and thinks Gene Hunt is a sensible kind of chap... and then off he goes in some ludicrously over-engineered sports car monstrosity and then slams into the crash barrier because the roads haven't been gritted properly, because of government spending cuts which he argued for.

I think James May is the acceptable face of Top Gear. He cultivates the same hairstyle I was trying for in the sixth form, with similar results. Also he gets to wind up Oz Clarke in the programmes they do together - another easy target, but hilarious nonetheless.

Really, the most effective deterrent to making these kind of comments would be if Gordon Brown used PMQs to slag the protagonists off. He could call Carol Thatcher "a honky moron" and Clarkson "a bubbleheaded blowhard." An abuse of Parliamentary Privilege to be sure, but a very amusing one. Let's call these f***ers out before they do any more damage.

Binyam Mohammed: time for Obama to clear up these nasty Bush loose ends

The worst president in US history has left the building... but sometimes it doesn't feel that way.

For the second time in a year, David Davis (who is excellent on civil liberties issues, despite being crap on most other things) has hit the nail on the head: it's completely unacceptable for UK ministers to stay silent on allegations that the UK was complicit in torture.

Binyam Mohammed is a UK citizen who has been detained at Guantanamo Bay since 2004 after being arrested in 2002. He claims to have been tortured in Pakistan, Morocco and Afghanistan between 2002 and 2004.

The UK government says it is not in the public interest to release full details of the alleged torture because the US has threatened to withdraw intelligence cooperation with the UK if this happens.

Having already made the decision to close Guantanamo Bay, Barack Obama should distance himself fully from the discredited policies of the Bush administration by withdrawing this threat and allowing the facts to surface.

If he doesn't, that casts serious doubt on the Obama adminstration's 'progressive' credentials.

Even if the US doesn't cooperate, the UK government should release details of the torture - or whatever did happen - regardless. It is utterly unacceptable for any country to commit gross violations of human rights in the name of 'national security' or any other cause.

I seriously doubt that we get anything of value from the US intelligence agencies anyway, given that the entire ramping up of spending on national security institutions under Bush was, for the most part, simply a cover for mass surveillance of the US population and a huge 'pork-barrel' sop to defence companies.

If Obama wants to save large amounts of government money he could do a lot worse than repeal the USA Patriot Act and the Department of Homeland Security, vastly reduce the amount of money being spent on private defense contractors, and dismantle the KGB-style police state apparatus built up under Bush-Cheney.

Barack Obama has said he stands for a new style of politics. Now's the time to start proving it. And if he doesn't... the UK should start showing that it can stand up for democracy and freedom even if the US can't or won't.

Snow chaos: Everyone Blames Everybody Else

... to paraphrase Barclay James Harvest. (Well, somebody had to.)

Seriously though, this is hilarious. Count the number of blame assignments in the article:

• council chiefs were blamed for not gritting enough.
• transport chiefs were blamed for being generally crap (my personal choice. National Express East Anglia couldn't even be bothered to keep a proper website up and running. I haven't bothered linking to their site as there's a good chance it won't be up. F*** 'em.)
• Boris Johnson was blamed for ordering the suspension of all London bus services, unprecedented since the Blitz. 
• Boris blamed a huge volume of snow and a lack of snow ploughs. 
• Local councils claimed the snow was too heavy for their snow ploughs to work. 
• 'The wrong kind of snow' got blamed (resurrecting the classic British Rail excuse of 1991). 
• One council leader blamed a lack of overnight traffic overnight followed by a lot of cars in the morning, which 'compacted the snow'. (??)
• Motorists blamed the Highways Agency for not gritting properly.
• The Highways Agency blamed HGVs for blocking roads. 
• TfL blamed local councils for not keeping the 95 percent of the road network which they are responsible for, gritted. 
• The chairman of the Local Government Association's Environment Board blamed 'other organisations' for scapegoating local councils. 
• The Shadow Transport Secretary blamed the Government. 
• Peter Mandelson blamed xenophobic strikers. 
• I blamed Peter Mandelson. 
• A worker at Waterstone's bookstore in Oxford Street blamed the rest of the world. 

As Alan Partridge might have said: "this country..."

To quote the I Ching: "no blame". 

Joe Stiglitz says: let the banks fail!

A very interesting alternative strategy for dealing with the economic crisis comes from Nobel Prize winning economist Joseph Stiglitz. His suggestion? Let the dodgy banks fail, take over their infrastructure and build a new, healthier financial system, in the public sector (at least for a while).

It's similar to my previous suggestion of full nationalisation of the sector in many ways. The only big difference is that in my proposal the banks wouldn't default on their debt payments whereas in Stiglitz's proposal they would - it'd presumably all be dealt with through bankruptcy proceedings.

So there seems to be an emerging consensus on the Left that a state-led reconstruction of the banking system is needed to get us out of this mess. The question is: do you prop up the existing banks without letting them go bankrupt (the cost of which falls on the taxpayer) or do you let the banks go bust (the cost of which falls on their creditors?) To decide that I guess we have to know a bit more about who the creditors are. (I'm assuming that the existing bank shareholders lose out either way - either due to nationalisation or bankrutpcy).

Stiglitz's argument that bankrutpcy would restore some kind of market discipline - banks that took bad decisions would go bust rather than getting a bailout - has a logic to it. But there are externalities to these kind of banking failures. In the short run extra bankruptcies would make the economic situation worse, not better.

Also, a lot of the people who did the damage have already been remunerated - handsomely - for their efforts. I'm talking about huge city bonuses. Maybe we should impose retrospective surtaxes on senior bankers depending on how much taxpayers' money is required to rescue the banks they work for (or used to work for.) Very fiddly, though. A wealth tax would work a lot better.

I'm not sure whether I agree with the Stiglitz position compared with a bailout which incorporates nationalisation. It's a very tough call and I'll be thinking about it some more over the next few weeks.