Blog 2023 Malcolm Blair-Robinson

BP and Congress

Without wishing to be unkind, both the appearance of the Chairman of BP outside the White House talking about the ‘small people’ of America and the appearance of the Chief Executive before the Congressional committee have been complete and utter public relations disasters, which will further inflame both public and political opinion in the US in the charged atmosphere of a mid- term election campaign and an oil spill disaster which has become the biggest American trauma since 9/11. These two men were very badly advised indeed of what was expected of them and whatever counselling they received from lawyers and media wizards was as hapless as their disaster planning.

The position of BP as a corporation is catastrophic. It cannot stop the leak yet and it cannot explain itself to anxious millions. A fuming Administration goaded by an angry country aghast at the blundering of the oil giant’s response to the crisis and the suffering of the Gulf region, has the company by the throat. The bills are becoming eye watering. A $20 billion dollar fund not capped (and no chance of a cap now), billions of dollars in law suits with no clear line on the scale of the damage to environment, people or commerce, and fines which can range from $1000 to $ 4000 per barrel per day leaked, now known to amount to some 60,000 for each day of the near sixty thus far. 

There is now an increased risk of Chapter 11 or, if Congress becomes much angrier, of BP’s U.S assets being impounded. Moreover on the political front Cameron’s visit to the President in July when much of importance is on the agenda, there is now a certainty (unless the leak is stopped which seems unlikely by then) that the disaster will dominate the media coverage in America, sucking Cameron into the drama. The Government of our closest ally has the biggest calamity since 9/11 on its hands, what is the British Government doing to help etc?

In this developing crisis things are getting worse not better. Shareholders should be very worried. Their company leadership does not appear to be up to this unprecedented situation. To change in the middle of it would surely be rash. Yet such is the scale of events, something more is required. What happens for instance if the relief well blows? Is there a plan?

A Missing Piece

BP has now agreed to set up a $20 billion dollar fund and cancel its dividends, as this Blog indicated it would have to a week ago. In the deal announced after talks at the White House there is a large piece missing. President Obama indicated this tidy sum was ‘not a cap’ on BP’s potential liability from law suits and fines. There is therefore a ring fence for the fund but none for BP as a whole.

The Times now reports that lawyers in the US are beginning to see Chapter 11 as a very real prospect, again as prophesied in my post 18/06/10, if BP’s liabilities remain open ended. There are serious problems surrounding this. Such is the public anger in America, with mid term elections looming, President Obama would be unlikely to obtain Congressional agreement to a cap. On the other hand without one BP in its present form may go under. Chapter 11 is not the end of the world. General Motors has now come out.

It would allow an orderly re-structuring, maybe with a bad US segment to be run off and a good one to be sold on. Whichever way would be bad news for current shareholders. Because of the big holding of pension funds  in this company on both sides of the Atlantic, anger needs to be tempered by self interest and a cap agreed. In the triangle of politics, oil and pensions, the latter may in the end be seen as the critical issue. Anger will then focus full square on the executives of BP. The content of those emails may be their undoing.

Reform comes to the City

The Chancellor’s speech last night at the Mansion House was hugely encouraging. At last there is evidence that the nature of the problems we face as well as the scale is understood. I am not very particular about the nature of regulation. Any logical system properly organised will work. The current system was illogical and failed. But the real failure was in control. An economy on any scale, whether personal, local, national or global is like a fire. Controlled and burning within its boundaries it is a vital resource upon which all civilisation depends for almost everything. Left to burn out of control it eventually consumes all.

The historic mistake was to believe economic activity could be regulated so that it would not have to be controlled. The result is a banking system which ran amok pouring money into domestic and commercial property massively inflating above their worth these assets and fuelling personal and national debt beyond the capacity to manage and in some cases ever to repay. Meanwhile industry and innovation were starved of funds. We now have an economy in debt up to the gills and a complete imbalance between wealth creation and consumption.

This blog is happy with the new regulatory proposals but applauds to the rafters the new powers of the Bank of England to control an overheating economy by shutting off funds. In other words the new Financial Policy Committee of the Bank of England with the remit to control (or conversely boost) overheating (or under-performing) segments of the economy is the absolute key safeguard from the lunatic disregard for reality which got us and the West into this mess in the beginning.

As set out in my book 2010 A Blueprint For Change, from a more humble voice in a more rustic setting  than the grandeur of the Mansion House, there are certain matters of fact and logic at the core of an economy, whatever  political ideology guides it, and if it is to work, these have to be stuck to.  There are no clever theories nor wonder innovations which can circumvent the truths at the core. It is a great relief to discover we have a Chancellor who understands this (the Bank Governor has known this for quite a while). We must hope he can deliver. He has gone up many notches in my estimation and I am inclined to believe he can.

More Enquiries

Predictably the Unionist side and their sympathisers are calling for enquiries into various atrosities from the years of strife to be investigated to balance Saville. Although there may be a case for some sort of  Truth and Reconciliation  commission on the South African model, the call for more enquiries is misplaced.

Nobody argues the suffering and grief the years of bloodshed brought, nor that the IRA did terrible things, nor the ruination of lives from loss that follows the death of loved ones or the terrible maiming and disabling of those who survive. But in the end it was known that the IRA in its various forms and the Unionist paramilitaries were in a state of armed conflict where the tactic was terrorist attack upon civilians or assassination at gunpoint of so called enemies. They saw themselves as fighting for a cause. They were seen by the country as terrorists, which classification denotes criminals not warriors.

Bloody Sunday was quite different. Here the British Army, in support of the Civil power and acting as armed police to protect the innocent from terrorist attack, was wrongly deployed under the wrong orders and as a consequence lost discipline and ended gunning down unarmed civilians without proper cause and when itself not under lethal threat. This was a catastrophic failure not of a known terrorist organisation, but of an essential pillar of the State which has a Constitutional duty to to uphold the rule of law and protect from assault the population of the United Kingdom,  of which Londonderry is an historic constituent City.

To fire indiscrimiantly upon its own citizens causing death and injury is the greatest crime an army can commit. It is for this reason the Saville Enquiry stands alone. This is why David Cameron, to his very great credit, yesterday uttered on behalf of us all his very deep sorrow for the unjustified and unjustifiabe events of that dreadful day.

Bloody Sunday

Whilst I do not see how the cost of this enquiry can be justified, I have no doubt at all that it is one of, perhaps the, most conclusive and healing outcomes to any enquiry in our history. It confirms what most always suspected, that the Army had gone badly wrong on that fateful day. Unarmed teenagers being shot in the back never squared with the Army’s assertions of responding to life threatening attacks.

There is a powerful lesson in this for both the Establishment and the Army leadership. I have to confess I have never been impressed with the leadership of the British Army down through the pages of history. There have been a few giants, Marlborough, Wellington, Montgomery among those, but the regular run of the mill leadership has been poor and the record mixed. The Navy and the RAF are much less in the news but much better organised with generally better minds.

Both the Army itself and the Establishment must, or certainly should, have known what had happened in Londonderry within days of this calamity. It should have conducted a proper inquiry which would have come to similar conclusions to Saville and should then have  brought those whose conduct appeared to fall short before a court marshal, including and especially relevant officers. Civil proceedings may also have been appropriate.

Failure to do this, allowing the families of the victims, from the  disadvantaged Catholic community of those days, to continue to live for decades under the cloud that their loved ones were guilty of conduct deserving of summary violent death, did more than any other thing to fester and inflame  IRA hatred and boost recruitment. Countless numbers of innocent people died in the violent years that followed.

For leading Generals to come on the airwaves now and say we must remember how well all the other troops have behaved since, is beside the point. Of course our troops behave or we would disband the Army and start again. But on that fateful Sunday they did not and their leadership was flawed. The  cowardice of the military authorities and their craven establishment backers over Bloody Sunday is a stain upon the record of the British Army. It is an indictment of the belief that a cover up is the route to follow in difficulty. Like the glow of our great historic victories, the shadow of this sorry episode will remain. So it should.

More about the Banks

Last night Will Hutton delivered another excellent Dispatches programme on Channel 4, showing just how brazen the banks have been in ignoring the lessons of their rescue and how, as he puts it, they have become like a State within a State, ignoring government or lobbying it to do their bidding.

The most striking feature in my view was the research undertaken to support the narrative, which showed that the vast majority of all bank lending is on residential or commercial property and credit cards. Industry, upon which the regeneration of our society and economy depend, accounts for only a small percentage of the total. Industrialists lined up to report difficulties in getting funding.

This is truly appalling. It shows that the banks have not only drained the taxpayers’ pockets in their £trillion rescue and gobbled up the £250 billion of quantitative easing to fund their gambling on derivatives again, risking another potential collapse, but are the engine of the unsustainable and deeply damaging inflation of property assets which has destroyed the capacity of the economy to function as a socially cohesive force.

This new government of ours will have to sort this out. Because of its political complexion they will stop short of this, but I think the problem is now so big that nationalisation of the entire retail banking system is the best way forward with all aid,  support and guarantees being withdrawn from the rest of it, to be cut adrift and allowed to sink. We  now know that it is nothing but a cancer eating at our financial stability, not a vital service, and we shall be better off without it.

The Coalition will balk at such a move. Labour, dusted down with a new leader would be wise to engage it. As in 1945, public ownership of vital businesses and utilities could prove an election winner. Just as the post-war country was very different to the one which challenged Hitler in 1939, so the post-cuts country will be very different to the one which pre-crash waved plastic cards at everything it wanted, egged on by the alchemists of the City of London.

Another Black Wednesday?

Apparently an alarming number of investors are betting upon a market crash, as nervousness about the state of the sovereign debts mount.

A  global financial crisis brought on by the banks being silly has been convenient to everyone, as a simple thread of explanation for the economic disaster, politicians especially. It is now beginning to look as confused as asserting that the iceberg hit the Titanic, rather than the other way around.

Everywhere the evidence mounts that this was and remains a global debt crisis. Banks are caught up in it and were responsible for the initial impact with their toxic assets and their gambling business model, but it is governments and their populations, all of us, who are really in trouble, because we are at the root of the cause.

We began to believe and we told each other that it was possible to have a living standard based not upon earnings but on a credit score. Not only did individuals live above their means on borrowed money, but governments and nations did also. At the heart of the plan was the delusion that continuing rises in the value of assets, whether houses or shares or whatever, could be engineered by demand alone and not by actual expansion of wealth creating capacity. In other words making money became confused with making wealth.

Now we have wound up with an entire economic structure which is flawed and creaking. Governments have borrowed so much there is no certainty that they can all repay what they owe, or that their populations will tolerate the shock decline in living standards needed to make that possible. If one defaults there is a new banking crisis. British domiciled banks are exposed to over £150 billion in Ireland alone. The mind boggles.

Not only have house prices risen way above true value financed by debt, but shares are consistently over valued also. Witness the astounding disclosure that BP’s dividend is 17% of the income of the UK pensions industry, and 12% of the FTSE 100.  This is not the fault of BP. It is the fact that fund managers have, since big bang, been engaged on growth not income and have sold capital to make up income shortfalls to disguise lack of earnings. Put another way they have forced up the price of shares so high that the dividends paid on the popular shares are at a tiny percentage of this inflated market price. Market price will depend on demand, but traditionally was a balance of shrewd investment for the long haul and speculation for vibrancy and competitiveness. Now it is tipped excessively towards speculation.

Just as the banks went bust, but were rescued before we knew it, because their ridiculous parcelled debt packages were not worth anything in a collapsed market, so the banks will face ruin again if excessive exposure to dodgy sovereign debt which defaults, has been their business model. Meanwhile there are prophesies of a new housing slump and another Black Wednesday. Doomsday may not come, but if we escape, it will be only just.

This is why all members of the coalition government are hell bent on cutting, no matter what they said before. They have not said it yet but a double dip recession brought on by re-modeling our economy so that the sums balance, shifting at least twenty five per cent of GDP away from the state back to the private sector, ensuring more of what we buy is British made paid for with our own money, may well be a price worth paying to avoid economic collapse.

The idea that we can borrow our way out of this is well and truly dead. The reason for that is that what we had before was an illusion. The only reality is what we owe. Unless we deal with that debt there can be no lasting recovery. Only another illusion.

Tony Blair

It is interesting to see (and hear) Tony Blair pooping up on the media here there and everywhere all of a sudden. According to his own report there is about to be a breakthrough over the Gaza blockade through a deal he has brokered. If this is so it is very good news. Negotiating conclusions to historic enmities is his greatest strength. 

I wonder if we heard and saw little of Blair before, because of sensitivities about the response from the previous occupant of  No 10. Or could it be that now that Labour is in opposition he feels free to take a higher profile?  Then again perhaps as Chilcot progresses he thinks he needs to stack up some Brownie points. Just in case.

But anything that improves the situation between Israel and the Palestinians is more than worthwhile. Tony Bair should now concentrate on this issue above everything. I believe his job is unpaid. No matter. Most everything else he does is overpaid.

BP Fund and this Blog.

Regular readers of this Blog know that its purpose is to try and indicate outcomes by getting ahead of the curve of current commentary. It is with pride that we can report that on June 11th in a very extensive post on the stricken oil giant, I suggested that a ring fenced fund, independently administered, of billions of dollars was the best way for BP to get this terrible challenge, which will last years, into some organised form of control. On July 13th it was announced that President Obama favoured the setting up of just such a fund.

This is not a claim that this blog guides White House Policy making. It is a claim that the constant attempt to get to the core of the issue can show more clearly what may happen next.

Whether it is the setting up of the coalition government, Afghanistan, the economy, BP, or the Middle East, events have either reached or are moving towards our position. So far Iran remains subject to a counter productive approach and thus the problem grows. More on that later.

That Goal

Okay, the goalie messed up. That is not why England failed to win. They should have scored two more goals to make up for the mishap. Blaming their unconvincing result on Green is misleading. England had the strikers there to score and they did not. The Americans played well and showed themselves well disciplined and good sportsmen.

The issue for England is this. We have to get away from this notion that everything hangs by a thread. It should not matter if somebody makes a mistake or another is injured or whatever. We are not there for tactics or strategy or to play beautiful football. We are there to win and that is why and only why we play. We will, with perhaps the best strikers in the world in the team, go on scoring as many goals as it takes to achieve that objective.

If it comes to a penalty shoot out do not even think about missing. If that skill has not been practiced to utter perfection and beyond everyone in the team should send three months pay to charity. They can all afford it.