Archive for February, 2018

Blog Goes into Hibernation for a While

Wednesday, February 28th, 2018

I have an important piece of brand new fiction now in process of writing and while that happens I will not have time to maintain a regular Blog. As there is so much going on at here and abroad, I will contribute from time to time on the big issues and links will appear on Twitter and Facebook to alert you. 

Thank you all for your loyal support!

Brexit: Crunch Time Coming

Wednesday, February 28th, 2018

The inevitable day of reckoning is coming. A combination of a split Tory party facing diametrically opposed positions plus the ultra unionist DUP which makes, under Arlene Foster, an industry out of blocking coherent government, which is why NI power sharing has stopped, means that the UK’s official position  on Brexit is a fantasy assembled by fools.

It is now clear, as it has been from the very beginning, that the government has absolutely no idea how to bridge the gaps and unite the opposites in its negotiations with the EU. It started off on the unjustified assumption that the EU would regard trading with the UK as a must which took priority over everything. In fact the EU regards Brexit as idiotic and plainly against the UK’s national interest, trade as a sub issue, but the integrity of the Customs Union, the Single Market, the various Treaties and all the various legal frameworks and protocols which make the EU a political achievement unique in history, as a political fundamental. There will be no compromise and in any event it would be impossible to get agreement for such a thing from all 27 of the member states. So two years out from the referendum and we still have no idea. There are two options.

One is over the cliff to a hard Brexit. The result of that would be economically so disadvantageous to the UK that once the effects were felt the political owners of the project, the Tories and DUP, will be set upon by the electorate and wiped out. The UK will then re-join the EU. This is all very unlikely as there is no chance that hard Brexit would get through parliament where Remainers and Soft Brexiteers have a substantial majority in both Houses.

The second option is, as has been said over and over, we remain in the customs union and close to the single market and accept the rules regulations and jurisdictions that such an association requires, without any say in what they are. Soon the UK would tire of being an EU protectorate and would rejoin as a full Member.

So all roads end up at the same destination.

Government By Opposition

Tuesday, February 20th, 2018

There is something very odd about this Tory government. Thatcher would not even recognise it as a government. Because governments act and do and fix. But this government just talks. It talks in airy fairy terms about aspirations and hopes, whether about Brexit or tuition fees or whatever, as if accepting that it is not in power, but outlining the kind of things it might like to do if it were. So whether it is Boris about, well Boris, May about tuition fees or national security and the EU, or the latest appearance by David Davis in Vienna about keeping all the lovely regulations in place, or ones just like them, which Brexiteers though they had voted to get rid of, we are left with a peculiar sense that we are being governed by people who do not realise that they are in charge and responsible for all of it.

If tuition fees are the highest in the world or nearly so, it is because the government of which May was a cabinet member put them up there and setting up an inquiry to find a formula using smoke and mirrors to pretend this is not the case will fool nobody. If there is anxiety about maintenance of European security cooperation, it is because the government of which May was a cabinet member called a referendum before it had worked out what leaving the EU would entail and without one single clear idea of how the UK could prosper better outside it. Or how a mass of critical pan-EU agencies, of which we are leaders and innovators, would work without us, or more to the point, how we would work without them.

If we are going to keep all the regulations as Davis asserts then why are we leaving? Why is his negotiating team constantly proposing things which it knows in advance will be rejected and which are thrown out within minutes of their being proposed. Why is the ministry of which he is the Secretary of State unable to explain to positively anybody anywhere what on earth it is, specifically, the UK wants? Apart for the silly of being out with all the goodies of being in. Because that is a very big No No, which would never get by 27 heads of government, the European parliament or, in the case of any new trade terms, ratification by each of the parliaments in the member states.

The answer of course is simple. The cabinet is split into two separate pieces like a well seasoned log beneath a nice sharp axe. Each piece wants the opposite of the other. This cannot work. Neither can it go so on. Sooner or later a nice sharp axe, wielded by the people through the ballot box, will sunder them all.

America’s Licence To Kill

Sunday, February 18th, 2018

The whole world shares America’s grief at the terrible mass shooting in which 17 children and teachers were gunned to death and many others badly injured. But then come the questions. Why does America do nothing about the root cause; the constitutional right for every citizen to bear arms? No other country in the world has a legally armed population with more authorised guns in circulation than people.

What interpretation of freedom demands that children’s lives are at risk in school? Or anyone anywhere is legally and constitutionally at risk of being shot? Because that appears the be the effect of the deeply flawed provision in a document which was intended to bring light to the world and indeed has done so. Is the National Rifle Association a power greater than the State? These and many others are questions that the world asks, but which are for Americans themselves to answer.

There is something very wrong with a civilisation in which teenagers can legally buy and own automatic assault weapons designed to kill, yet cannot buy beer to make them tipsy. Whatever the evils of alcohol, they are as  nothing to mass murder.

Boris: More Hot Air

Thursday, February 15th, 2018

People who see Brexit as a disaster do so because, by any rational measure, politically, economically and socially, it is. Boris has not, once again, advanced one single fact or figure which can offer any tangible prospect of an uplift in people’s lives as a consequence of this ridiculous adventure. What he did do is to demonstrate, once again, that this weak and divided government is clueless and drifting, out of ideas and very nearly out of time, relying on pointless speeches full of meaningless waffle.

Well, there will be a day of reckoning and it is getting ever closer.

Sea Changes

Wednesday, February 14th, 2018

There are three sea changes in the environment of modern life. These are the beginning. Others will follow. They are diverse at one level, but connected at another. Though each is unique in its time and way, the change process which brought it into being is both normal and good. Because what they are changing is mostly bad.

The first is the social climate relating to misogynistic power, for long tolerated and accepted as normal. Favours were demanded as a right, mostly sexual but not always, as manhood enshrined a notion of power which could be exercised from  hovel to  castle, from family to institution, in education, academia, public service, business, charity, politics, show business; the list is as long as the diversity of human activity and engagement. Well, all that is over. Nobody now is willing to put up with it, nor let it go unchallenged. A sea change in behaviour will become universal and secure. There will always be abuse, but it will not be acceptable as a natural event at the margin.

The second is the disconnection between those who govern, either through politics, media or soft power, and those who are ruled or controlled. Gone is the natural trust in authority. The notion of it is seen as corrupt and many of the great and good are now under investigation in all parts of the globe for corruption. No longer are people willing to accept what they are told. They challenge and confirm for themselves the truth, via a technological information exchange that destroys the whole basis of the structures previously used to inform and influence public opinion. Power is judged not on what it promises nor upon what it claims, but on what it delivers at every level down to the very base of daily life. This represents a sea change in the way power can be exercised and imposes previously unknown limitations upon its effect. Above all it makes it easier, much easier, to take it away.

The third is in the financial sector. The long period of dormant interest rates is over. Like a gently rising tide they are flowing back into the system. They are not entirely within the control of central bankers any more, because governments needing to borrow to repair neglected social institutions and physical infrastructures are increasing the bond supply at the same time as QE is ending and inflationary pressures are mounting. Corrections are occurring between the excessive reliance of asset inflation to redistribute wealth ever upwards and into fewer hands, to a new emphasis on wealth creation through investment, which pushes wealth downwards and outwards so that more and more begin to share it. This sea change will alter the shape of globalisation and Western economic models for the good of the many and for a long time to come.

These changes will be accompanied by turbulence and not all impacts will be positive. But in the round and judged by response to need, all of this is more good news than bad.

The U.S. Federal Budget

Tuesday, February 13th, 2018

This Blog often finds itself defending Trump, or at least taking a positive view of America’s rather turbulent direction of travel. Unfortunately the Trump presidency is always awash with blown up dramas of Trump gaffes, u-turns, insults and self-congratulation which certainly make the news story that he is like no other occupant of the White House ever, but actually have little to do with the ongoing governance of our closest ally. The nation to which we have uniquely close ties across the cultural, professional, scientific, academic, military, security, intelligence, commercial, business and family arenas.  But not politics. The politics of the two countries are very different, usually polite, mostly correct but  rarely close. Moments of camaraderie have happened, but they are the noted exceptions rather than the general rule.

The latest attempt to agree a federal budget brings out two important elements which are to be welcomed. The first is Trump’s own observation that his country has wasted, often under Republican administrations, $7 trillion  in the Middle East, the only good of which is to try and clean up the bad resulting from previous efforts. A continuing and continuous process.

The other is the need to renew and update the national infrastructure, much of which is past its use by date and crumbling, but to put the onus on individual States to do more to renew their own fabric and pay for it. This is entirely right. The American people do not, most of them anyway, like the concept of federal government and all hate federal taxes. So if you want small government you have to do stuff in your own State and pay local taxes for programmes voters approve. Or leave it to private enterprise and pay the tolls to deliver a profit to shareholders who carried the risk. It’s that simple.

Brexit: They Kick The Can On

Friday, February 9th, 2018

So the two much trumpeted meetings of the so called War Cabinet, the cabinet sub-committee of senior ministers trying to work out what sort of Brexit they want, failed once again to agree. This is because half of them want to leave the EU without an agreement, cut adrift from everything EU and go WTO. The other half believe such a course is a folly from which the UK would never recover and would trigger a slow decline. Their case is bolstered by the fact that it was the because we were in a decline, having failed to match the unexpected post WWII boom in the economies of France, Germany and Italy,  which drove us to join them in the Common Market in the first place. Meanwhile the hard Brexiteers waffle on about a golden age without explaining one single tangible advantage it will bring and to whom.

So the hapless May, lacking the courage to cut adrift from the hard Brexiteers, led her ministers on a continuing can kicking exercise down a road to a destination, which they all very well know cannot be reached. This is the notion of leaving both the customs union and single market, whilst enjoying open borders and frictionless trade with the EU of which we cease to be a member, yet without acceding to the rulings of the ECJ and without the four freedoms of movement of capital, goods, services and people.

Such a deal is not available and never has been. For the EU the Union is not about trade and trade will never be given priority over the integrity of the political union. It is the political union and its guarantee of the four freedoms which has brought peace and harmony to a continent torn by near continuous fighting since the fall of Rome. Trade is the extra benefit, but to enjoy it free of tariffs and borders, you have to accept all the political consequences.

For some reason the Tory government is unable to get its split head around that.  Ever in hope of Bavarian car makers demanding  the EU to do GB’s bidding, they were yesterday faced down by UK Japanese car makers saying that if it is a hard Brexit, they’re off. Wow.


Trumpenomics? More Likely An Overdue Re-Balance

Tuesday, February 6th, 2018

It is an inherent feature of Trump’s persona is that he only does beautiful. Put simply he claims the credit when things go right, but tries to duck away when things go wrong. So when he claimed the credit for the record rise in US stocks, he also bought into ownership when the market crashes. Whether this is a major correction, a minor blip or a big panic is not yet clear at the time of composing this post. What is clear is that there are some very real problems which may well become a major threat.

As this Blog has pointed out so many times tax cuts, and infrastructure investment go hand in hand. The cuts are the cart to the investment horse. As we all know you should not put the cart before the horse. What should have happened is for the Republicans to formulate and push through a major infrastructure renewal programme of FDR proportions, needed in a country which at some levels and in some places is falling to pieces.   The surge in revenue resulting from the economic reboot, allows tax cuts to hand back to consumers a greater slice of their increased earnings. This they spend. This pushes the economy on an upward trajectory which is secure and dynamic.

Unfortunately the fractured Republican party argued for too long and in the end went for the tax cuts first, which means the Government has to issues bonds, ie  borrow money, to pay for them. It might come good, but it might not. There are the political questions about whether the infrastructure deal will happen. But also there is a big adjustment going on in the world economy.

Money is shifting from assets to production. This is because, since the 2008 financial crash, the US, UK, Japan and later the EU have been buying government bonds on a massive scale with printed money, which then flies into assets, which inflate through stoking demand. Interest rates are held at near zero so investment becomes leveraged because the profits can be eye watering even using borrowed money.

But the programme of quantitative easing is being wound down everywhere and interest rates are likely to rise. Moreover central banks are preparing to sell back into the market their vast stocks of bonds. At the same time as the US has to issue a whole lot of new ones. That will depress the bond market, effectively pushing up interest rates whether the central banks act or not. All of that will weaken the balance sheets of banks. That will make credit tighter and more expensive. You can see the drift. Most likely is a volatile market drifting downwards as capital re-positions towards wealth creation rather than asset inflation, ensuring a better reward for both investment and labour going forward. Leveraged speculators may burn, but most will come through fine.

But it is a dangerous moment. If you hold ready cash you could be in for a killing. But if your company, or you personally  are over borrowed, it might be time  to dust off Plan B. At the end of the day the world economy remains strong. The weakness is in the financial structure underpinning it.


Brexit Confusion

Monday, February 5th, 2018

No wonder Michel Barnier has said that trade barriers are unavoidable if we leave the customs union and single market. The government talks with many voices, all of which are conflicting. The hapless Brexit Committee is to meet twice this week to try to agree something, but there is no point in coming up with an aspiration which cannot and will not be achieved. At every level the British people are being misled, mostly by Brexiteers, but also by former remainers like May, trying to appease elements of the Tory party diametrically opposed to the voice of reason.

The present position can be summed up thus. A confused passenger at an airline terminal demanding to fly the Atlantic, but refusing to do so in an airplane.