Red Nose Day

Today is the day when the British population allows itself to be harangued by televisual "personalities" into handing money over to "good causes", although the exact nature of all the causes being supported is not shown (unlike every charitable fund-raising I have been involved with).  There is nothing wrong with "good causes", but it is the bleating by the overly-paid to bully the less well off that really grates.  Only a few weeks after we learn that just one of the pundits on Match of the Day is paid £40,000 a week to say "The Bolton back four were all over the place for that goal, Gary" - £1.6 million a year,  a reasonable Premiership footballers salary, without the running about or risk of injury, perhaps the BBC should be looking at docking some of their wages instead of blagging money from the rest of the population.

But in case I am thought of as being mean minded, here is a way that the BBC can donate several million without losing a single penny to which it is entitled.  As you are aware dear reader, the Government in its generosity with your money decided many years ago that it would pay for a TV licence for every household containing a pensioner aged 75 or over.  As far as I am aware the licence is not compulsory and the households have to apply for the licence but the take up is quite significant and results in income to the BBC of £550 million a year paid for out of your taxes.

I have no problem with that, mostly because the free TV license was given to cover up a lousy pension increase many years ago. Besides it gives 74 year olds something to look forward to, but it does lead to an unjust enrichment of the BBC.

How is that?  Well the simple fact is that if you die midway through the period of your TV license, your executor can write to TV licensing for a refund. Refunds are available for complete unused quarters that remain on a TV Licence at the point it was no longer needed. Only the executor of the deceased licence holder's estate can apply for a refund in these circumstances.

Now the elderly can be differentiated from the rest of the population in many respects, but chiefly in that they have a much shorter life expectancy.  A 75 year old typically has a life expectancy of around 10 more years while a 90 year old has a life expectancy of 3 years.  Put another way,in very round numbers,  a 75 year old has something of the order of a 10% probability of dying in the next year while a 90 year old has a 25% probability.

Using a back of the envelope calculation, it would appear that something around 8% of the £550 million represents the cost to the government of broadcasting to the dead, and that money is trapped at the BBC.  The government (not the deceased) paid the money, so the executor can't reclaim it for the estate, and the government can't reclaim the money because it is not the executor of the estate of the deceased. The net result is that the BBC and its overpaid onscreen personalities are overpaid to the tune of nearly £50 million.

Hand that over to charity Pudsey and I might pay attention to your unedifying appeal.

Socialist sell out - nothing to see here

Tony Blair has joined the select group of retired politicians from liberal democracies who make big bucks from authoritarian regimes. He recently signed a contract to advise President Nazarbayev of Kazakhstan, and has opened an office in the capital, Astana, although the nature of the advice is confidential. It seems that the advice is not on electoral matters because Mr Blair's client managed to secure the vote of over 95% of Kazakhs and his party holds all of the seats in the Kazakh parliament.

According to some reports, Blair is advising the president on a bid for next year's Nobel Peace Prize. I wasn't aware that this was a beauty contest,.but that may be my naivety. Tony WMD Blair is a curious source of advice on such matters, although we should not forget the contribution made to world peace by a Nobel Prize winning US Secretary of State by his use of carpet bombing in IndoChina.

If he was a US citizen Blair would be held to account for such actions under The Foreign Agents Registration Act (FARA), enacted in 1938. FARA is a disclosure statute that requires persons acting as agents of foreign principals in a political or quasi-political capacity to make periodic public disclosure of their relationship with the foreign principal, as well as activities, receipts and disbursements in support of those activities.

But in the not-at-all-corrupt UK, Blair's remunerated business interests are not open to public scrutiny. They are not mentioned on the website of the Advisory Committee on Business Appointments (Acoba), the watchdog that oversees the wheeling and dealing of ministers after they have been kicked out by the voters.. Blair is not a peer of the realm, so avoids listing his business interests in the House of Lords register of Members interests and he did not have to notify the Foreign Office of his appointment.

All of this leads towards the question of why we pay this former prime minister a pension immediately after leaving office? The idea was that prime ministers, who would probably be quite elderly would retire to the country with a comfortable allowance with the understanding that participation in any form of politics or world affairs would be likely to either undermine the present incumbent or compromise the dignity of their office.

From discussions last weekend with a cabinet minister I understand that this might change for the present and future prime ministers, but it doesn't stop Blair from having his cake and our cake, and wanting to eat them both. But there may be limits. If any advice is given in relation to this country, Blair will likely be in breach of his Privy Council oath, an oath of loyalty to the Queen and her successors and against the opposing interests of all other foreign leaders.

"You do swear by Almighty God to be a true and faithful Servant unto the Queen's Majesty, as one of Her Majesty's Privy Council. You will not know or understand of any manner of thing to be attempted, done, or spoken against Her Majesty's Person, Honour, Crown, or Dignity Royal, but you will lett and withstand the same to the uttermost of your Power, and either cause it to be revealed to Her Majesty Herself, or to such of Her Privy Council as shall advertise Her Majesty of the same. You will, in all things to be moved, treated, and debated in Council, faithfully and truly declare your Mind and Opinion, according to your Heart and Conscience; and will keep secret all Matters committed and revealed unto you, or that shall be treated of secretly in Council. And if any of the said Treaties or Counsels shall touch any of the Counsellors, you will not reveal it unto him, but will keep the same until such time as, by the Consent of Her Majesty, or of the Council, Publication shall be made thereof. You will to your uttermost bear Faith and Allegiance unto the Queen's Majesty; and will assist and defend all Jurisdictions, Pre-eminences, and Authorities, granted to Her Majesty, and annexed to the Crown by Acts of Parliament, or otherwise, against all Foreign Princes, Persons, Prelates, States, or Potentates. And generally in all things you will do as a faithful and true Servant ought to do to Her Majesty. So help you God."

As Borat would say "Yak-she-maj to that"

DS-K: POS

I always figured Dominique Strauss-Kahn was a wrong'un, but like the O.J.Simpson trial, it was apparent from the start that the US judicial system is susceptible to money and media influence.  In the DS-K case, that involved a lot of French media pressure to the effect that their boy did no wrong. DSK’s legal strategy, which did dispute the events other than the housekeeper’s willingness to participate, meant that the case rested largely on his credibility, and that of his accuser. The case began to fall apart after prosecutors cast serious doubt on Diallo, her story, and her truthfulness. Neither of the legal teams concentrated on the DSK's behaviour.

But now it turns out that the boot is on the other foot (I have substituted a condom-related aphorism there, but good taste dictates otherwise.  As luck would have it the French police were investigating a pimping racket based on the Hotel Carlton in Lille, implicating a senior police officer, barrister and local businessman when whose name should pop up but that of the former grand fromage at the IMF.

How was this redoubtable public servant implicated?  Just the small matter of having women brought to him not only in Paris but also in Washington.  One of the young ladies involved, a Belgian in her 30s, known as Jade, told the French newspaper, Nord Eclair, she was taken to Washington for an encounter with Strauss-Kahn in a hotel in January 2010. She was paid by businessmen on her return to France. She said Strauss-Kahn showed her around the IMF building the next day and posed for a photograph with her in his office. It seems that somewhere there must be some incriminating evidence if the NY Attorney General wants to reconsider the previous case.

The businessman in the case said he paid for flights and costs. He is believed to have spent thousands of euros of company money on organising soirées for Strauss-Kahn, putting receipts marked with the initials DSK through his expense accounts, but Strauss-Kahn had not paid for anything. Investigators might like to check that out, and the folks back at the IMF might like to check whether Mr Strauss-Kahn registered such lavish hospitality.

Most intriguingly, one of these encounters took place in New York the night before the perv tried to hump the cleanup maid. The one point in DS-K's NY case that might now work in his favour is that he can now claim that it was an honest mistake, and he thought the bill had been settled by someone else.

Le Figaro: Why the economic crisis should kill Keynesian conventional thinking

Another post that is a shameless reposting of something that appeared elsewhere.  This first appeared in French, in Figaro, behind their paywall, but for some inexplicable reason, the English translation appeared on this side of the paywall.  Maybe they want the word spread to the non-French speaking world, which I am happy to do. 

The article is a criticism of Keynesian thinking. On the one hand this might be dismissed as a bit of rhetoric against an Anglo-Saxon economic philiosophy that has some traction in many parts of the world, but I think it hits the nail on the head.

What is missing is a further explanation of the nature of the crisis and more realistic outcomes.  If I had to sum it up, it would be the erosion of the West's competitive economic advantage and the consequent drop in living standards.  This is essentially no different from and old and tired business whose margins have been eroded.  The solution for the business is not to spend more and fund that spending by borrowing, but to cut its costs and if necessary to cut pay and bonuses and change the terms on which it deals with its suppliers.  Borrowing and spending leads to bankruptcy.  Ask any Greek or Italian.

A pre-eminent conservative French economist blames the West’s imploding economy on long-accepted Keynesian policies of boosting consumption via public spending.

PARIS – It would have been only logical that the recent financial crisis and its current consequences radically challenge the prevailing ideas on economics. But it is fascinating to see to what extent people can stick to erroneous beliefs. The strange and enduring success of anti-capitalist ideas after the spectacular collapse of communist and socialist societies illustrates this tendency all too well!

The ideas inspired by Keynesian theories are dangerously dominant. Despite the fact that they give no coherent explanation for the appearance of crises, everybody defined their “policies to end the crisis” according to Keynes’ ideas. The main point is simple: if there is an economic crisis, if economic growth is weak and the unemployment rate high, the right thing to do is to increase the global demand, which implies in particular to increase public spending. Every government favors this method, since it enables them to justify any demagogic spending, any waste of money.

Nevertheless, in all areas of human activity, wisdom means understanding the causes of a phenomenon before implementing measures to solve it. In our case, the economic and financial crisis was absolutely not the consequence of a lack of demand, but, on the contrary, of an excess of monetary credit and an excess of spending (for example, on real estate.)

A strange incoherence

Moreover, the very idea of increasing ex nihilo the global demand is an absurd idea: if a government spends more, it must find a way to finance it. Public spending always corresponds to a transfer of demand (at the expense of the taxpayers if it is financed by taxes, at the expense of the economy if it is financed by loans) and never to a net growth of demand. We should not be surprised if such a policy doesn’t bear fruits, as the American example shows: the public deficit of more than 13 percent of GDP did not prevent low economic growth and a high unemployment rate, while seriously disturbing the financial markets.

Keynesian thinking habits lead to a strange incoherence. Indeed, on the one hand, we recommend re-boosting consumption – which implies reducing savings – and on the other hand, we pretend to stimulate the economic activity and the investment by policies of monetary growth and low interest rates. But it is that kind of policy that caused the financial crisis in the first place, creating the illusion of important financing means thanks to purely artificial monetary credit, as we strive to reduce savings.

We should do exactly the opposite: cut out all obstacles – especially fiscal, which eliminate the incentive to save – and prevent any monetary growth which can only provide illusions and instability. That’s why it is dangerous to ask the European Central Bank to not only reduce inflation but also encourage growth. Like any central bank, it is quite unable to do so with success. The best thing to ask for would be to stop any monetary creation.

It is high time that we completely change the configuration of economic policy. It has consisted until now in creating massive public deficits and strong monetary growth. We should, on the contrary, drastically reduce public spending and tax burdens in order to encourage mass production, prevent any increase in money supply and incite people to save money within the framework of a major tax reform. The revolution we need now is first and foremost an intellectual one.

The Italian Job

I am reposting a comment from the pages of the Guardian about the Euro crisis.  What ever the political shenanigans that are going on, this goes some way to explain why Italy was in such a mess for a few days when in fact its borrowings as a percentage of GDP were lower than historical averages.  In addition, it is worth remembering that Italy has a substantial unofficial (euphemism for "black") economy which distorts that ratio, and the Italian public are not highly geared and are in fact substantial savers.

Six weeks ago the UK government took the unprecedented step of launching a legal challenge against an ECB move to make all clearing operations in euro-denominated instruments above a certain volume take place in the Eurozone under central bank supervision.


Most such operations currently take place in London, and on Thursday morning, the main London clearing-house LCH suddenly doubled the margin or collateral requirements on trade in 7-10 year Italian bonds, carefully timing the move to drive 10-year yields above the key 7% level, triggering a derivative avalanche that quickly took yields to unsustainable levels, while City economists appeared all over British TV announcing the end of the Euro.

This followed up the previous week's attack which had opened a breach or beach-head in the Eurozone at its weakest point, in Greece.

The main weapon in the ongoing 2-year war between the US-UK financial 'Allies' and the key Eurozone axis of Germany-Italy is the credit insurance or CDS which is taken as the market pricing of risk attaching to debt. London clears most Eurozone CDS, and when LCH (jointly owned by City traders) opened the attack on Italy, speculators holding no Italian bonds started buying insurance policies on Italian debt they didn't own but hoped to destroy ('naked CDS'), driving up the market measure of default risk on Italian bonds, and thereby further driving down the prices of the now supposedly 'riskier' bonds (which prices automatically factor in the market pricing of risk), and driving up the yield, which in turn, once above the 7% level, further drove up the price of Italian soveriegn CDS in a sort of virtuous speculative circle.

A coordinated derivatives attack, by the very people who will lose out if they don't destroy the Euro and ECB first, can move the prices and yields of the bonds the derivatives are nominally hedging much more than direct shorting of the bonds themselves (especially in the case of Italian debt where there's a huge market and great liquidity).

Eurozone leaders, led by Germany, have tried to ban such 'naked CDS', starting with a joint proposal from Merkel and Sarkozy to the European Commission in March 2010. But London has consistently resisted such regulation, repreatedly deferring even discussion, first delayed to July 2010, and since repeatedly delayed until at least July 2012 - by which time some people in the City think the battle will be over anyway.

Of course, the people who pay for this vicious cycle of unregulated (and untaxed - another battle) speculative asset-stripping, as the London-NY bearpack attacks the threatening Euro and Eurozone regulation, are the ordinary people of the Eurozone and of Europe more generally.

One can only hope that the experienced Italian trader Draghi at some carefully-timed point in the near future turns the tables on the feral speculators of the City and Wall St by suddenly announcing that the ECB will underwrite Eurozone sovereign debt.

It would be interesting to see if the UK government, on behalf of the City, then tried to contest the move as contravening the Lisbon Treaty they so despise.

Perhaps not, because a successful speculative attack on the Club Med would probably bring down a few of the UK banks that haven't fully insured their collective Club Med exposure of about ₤350bn.

Shrug of the shoulders

Much wailing and gnashing of teeth in the media as the Italian government bond yield hits 7%.  This say the armchair experts with the mikes in their hands is the end of the world as the Italians know it.

All cock of course. This is the yield on bonds already issued that has increased from 6.667% to 7%.  Not great, but in practical terms the higher yields will only hit the Italian government as their borrowings are refinanced, albeit that quite a lot has to be refinanced in the next year.

The bigger problem is that if you have a debt equal to 120% of GDP you have a problem with refinancing that debt.  The fact that you may have to pay an extra 0.36% of GDP per annum in interest in about 10 years when the entire portfolio has been refinanced is neither here nor there.

And for the benefit of those hacks who might think that markets don't buy government obligations at yields above 7%, here is a partial list of recent (last 30 years) UK government issues.  The coupon is given and the gilts were issued close to par so the implied yield was above 7%.

10% Conversion Stock 1996, 13¼% Treasury Loan 1997 , 10½% Exchequer Stock 1997 , 7% Treasury Convertible Stock 1997 , 8¾% Treasury Loan 1997 , 15% Exchequer Stock 1997 , 9¾% Exchequer Stock 1998 , 7¼% Treasury Stock 1998 , 14% Treasury Stock 1998-2001, 15½% Treasury Loan 1998, 12% Exchequer Stock 1998 , 9½% Treasury Loan 1999, 12% Exchequer Stock 1999-2002 , 12¼% Exchequer Stock 1999, 10½% Treasury Stock 1999 , 10¼% Conversion Stock 1999, 8½% Treasury Loan 2000, 9% Conversion Stock 2000 , 13% Treasury Stock 2000, 13¾% Treasury Stock 2000-2003 , 8% Treasury Principal Strip 07Dec2000, 8% Treasury Stock 2000 , 10% Treasury Stock 2001 , 11½% Treasury Stock 2001-2004 , 9½% Conversion Loan 2001, 9¾% Conversion Stock 2001 , 7% Treasury Stock 2001, 10% Conversion Stock 2002, 7% Treasury Principal Strip 07Jun2002, 7% Treasury Stock 2002 , 9½% Conversion Stock 2002 , 9¾% Treasury Stock 2002 , Treasury Coupon Strip 07Sep2002 , 8% Treasury Loan 2002-2006 , 9% Exchequer Stock 2002 , 11¾% Treasury Stock 2003-2007, Treasury Coupon Strip 07Mar2003 , 9¾% Conversion Loan 2003 , 2½% Index-linked Treasury Stock 2003 , 3½% Funding Stock 1999-2004 , 9% Treasury Stock 2003, 10% Treasury Stock 2003, 12½% Treasury Stock 2003-2005 , 13½% Treasury Stock 2004-2008, 10% Treasury Stock 2004 , 9½% Conversion Stock 2004, 9½% Conversion Stock 2005, 10½% Exchequer Stock 2005, 8½% Treasury Principal Strip 07Dec2005 , 8½% Treasury Stock 2005, 7¾% Treasury Stock 2006, 9¾% Conversion Stock 2006 , 7½% Treasury Stock 2006, 7½% Treasury Principal Strip 07Dec2006 , 8½% Treasury Loan 2007, 7¼% Treasury Principal Strip 07Dec2007, 7¼% Treasury Stock 2007 , 7¼% Treasury Stock 2007 WI , 9% Treasury Loan 2008, 8% Treasury Stock 2009, 9% Conversion Loan 2011, 7¾% Treasury Loan 2012-2015, 9% Treasury Stock 2012, 8% Treasury Stock 2013, 12% Exchequer Stock 2013-2017, 8% Treasury Stock 2015, 8% Treasury Principal Strip 07Dec2015 , 8¾% Treasury Stock 2017, 8% Treasury Principal Strip 07Jun2021, 8% Treasury Stock 2021

Sorry, what was the question

The BBC has published a list of the signs of dementia, to be used to shop elderly relatives to the NHS over Christmas. Not wishing to reflect on the possibilities for inter-family strife that could flow from a simple game of Snap, the following symptoms seemed remarkably familar.

• Struggling to remember recent events 
• Problems following conversations 
• Forgetting the names of friends or objects 
• Repeating yourself 
• Problems with thinking or reasoning
• Struggling to remember recent events 
• Repeating yourself 
• Confusion in familiar places 

Oh, and the BBC had an interesting piece on old people over Christmas... sorry, where was I?

The power of the establishment

Last night, our village, like many others, held a bonfire. One of the largest landowners in the village, a Catholic, and his tenant farmer, also a Catholic, negotiated with three members of our Parish Council, respectively a Catholic, a druid and an atheist over the siting of the bonfire where we would burn the effigy of the Papist conspirator. Hundreds of people traipsed through the garden of the third Catholic, paying their admission and buying hot dogs, mulled wine and soft drinks. The proceeds were counted by another Catholic and a Methodist and the profits were donated to ..... the local Church of England church.

That, dear reader, is the power of the Establishment.

Something must be done!

So Mr Edward Miliband, the leader of one of the UK's foremost political parties has decided that there are issues raised by the protestors outside one of our largest cathedrals that have been ignored and need to be addressed.

His perception doesn't go so far as to enumerate the issues but according to him there is "a crisis of concern for millions of people about the biggest issue of our time: the gap between their values and the way our country is run".

Well, gosh, with insights like that he should make it into the Cabinet. No, hang on, until last year he was in the Cabinet as a member of the government of the last 13 years that was booted out.

If anybody is to blame for much of the way the country is run, he can't be far from the top of the list.

Do the Germans have a word for "bunker"?

“Nobody should believe that another half century of peace in Europe is a given — it’s not. So I say again: if the euro collapses, Europe collapses. That can’t happen.”

I apologise that I missed the latest gem from the Bundeskanzlerin, who is fast becoming my pre-eminent supplier of fatuous quotes.  This shoddy piece of emotional blackmail slipped out last week while I was looking the other way.

I don't know which side she figures her boys are going to line up with or who the enemy might be, but in view of the preparedness and recent experience of German forces, I wouldn't fancy her team's chances in a Euro bust up. If she is thinking of playing for the other side from the UK, then I just fancy our chances both at home and away, and I guess that this time as three time winners we would get to keep the trophy.

Do you remember the good old days

.. when deaths on the rail network could be attributed to the privatisation of Railtrack, the ruthless pursuit of profit etc, although the performance didn't seem to be any worse than that of British Rail at the time of the Clapham Junction crash, the Lewisham rail crash or the performance of London Underground at the time of Kings Cross.

But now it seems the BBC is reluctant to finger the state owned but not for profit company who simply neglected to inspect the track at Grayrigg, os opposed to Railtrack who caused caused accidents through faulty designs as at Paddington and Potters Bar.

Royal Basketcase of Scotland

Much fanfare from the hacks as RBS reports a Q3 profit of £2 billion compared with a £1.3 billion loss same time last year, but a quick perusal of the numbers shows that all is not as rosy as they make out.

The top line shows £6.3 billion of revenues followed by £3.5 billion of operating costs, which sounds respectable until you realise that banks have a whole lot of impairment items that I would have called part of the operating costs of banking, but I am not an accountant.

First up is £700 million of net insurance claims - i.e. a loss making insurance business.  Now I don't know much about accounting for insurance companies, but I would have thought that paying out on isurance claims was really a sort of operating cost for insurance companies - the flip side of receiving all that premium revenue, which I assume shows up in the £6.3 billion of revenues, but maybe not.  Anyway, this gives RBS an operating profit of around £2 billion.

But hang on they then add in £900 million of impairment losses which brings their "core" Operating Profit (with a capital O and a capital P) down to £1.2 billion, and then they add in another £1 billion of "non-core" operating losses which brings their Group Operating Profit to a measly £200 million or so. A billion is still quite a big number, and to have a billion of losses seems pretty core to me when that amounts to 16% of your top line revenue.

But it gets worse than that.  For some reason that is not entirely clear, the directors of RBS have decided that impairments on sovereign assets are not the same as impairments on ordinary paper, so there is another £140 million of losses that aren't included in the Group Operating Profit, and then there is a payment of £60 million to the government for the Asset Protection Scheme.  That sounds rather like an insurance premium to me, so I fail to see why that isn't included as a normal operating expense.

Oh and then we have another £418 million of "Other Item" losses.  Have you ever noticed how the losses are always extraneous to the business, but the revenues are where the directors are focussing their attention?  Perhaps if they paid more attention, the shareholders (tax payers) wouldn't have to pay for the £2.5 billion of non-core losses that popped up in the three months - about £42 million for each working day.

So at this point RBS is in a £350 million hole, so where does the magnificent £2.004 billion pre tax profit come from?

From our old friend "Fair value of own debt".  In other words the credit standing of RBS relative to the rest of the market fell by so much in the quarter that the mark to market value in the hhands of the debtholders of the securities that the bank had already issued fell by £2.3 billion.  By one of the most ungodly accounting wheezes know to man, RBS get to book that bit of bad fortune as profit.  If that sounds like good news, then remember that the discount/gain will simply be reflected in future higher interest costs as the borrowings are repaid upto maturity than would have been incurred if the paper had not been marked to market. So understand this, nothing happened and nothing will change in the future with this debt, but because of changes in market rates, and without doing anything themselves, RBS get to show a £2.36 billion profit now and will record £2.36 billion more interest costs in later years.

That's right: 115% of RBS' Q3 profits have actually been made by bringing forward income from future periods and increasing future costs by the same amount.

Details here:
http://www.investors.rbs.com/download/announcements/Q3_Interim_Management_Statement_Conference.pdf

Euroballs #94

Around midday today some Euro-lackey in Brussels came up with the ridiculous notion that if Greece decided to leave the euro, it would also have to quit the European Union, according to the terms of the EU's treaties.

The lame-brained thinking of European Commission spokeswoman Karolina Kottova ran as follows "The treaties indeed confirm what we have been saying here: the treaty doesn't foresee an exit from the euro zone without exiting the EU". The comment was in response to a question about the provisions the EU treaties make for a country to leave the euro.

"We see Greece within the euro and the necessary instruments are in place and an agreement has been reached," Kottova told the Commission's daily news briefing. "So, as far as we are concerned, this is the only option that is on the table." The EU treaty does not specifically foresee the possibility of a country leaving the single currency area, which now comprises 17 countries, although it does provide for the possibility of a country leaving the 27-nation European Union. In article 50, the treaty says: "Any member state may decide to withdraw from the union in accordance with its own constitutional requirements."

Which is just a load of balls.  The EU treaty doesn't foresee a lot of things, but it doesn't stop any country doing anything not foreseen by the treaty.  I may cut the lawn this weekend, or then again I may not.  It isn't covered by any EU treaty, but that oversight doesn't stop me from doing so, or not as I decide.

A paper floating round Brussels a few years ago cam to the view that if a country left the EU, it would have to leave the eurozone, which overlooks the fact that the Vatican City, San Marino and Monaco all use the euro as their currency despite not being members of the EU.

But that isn't really the issue.  Bulgaria, the Czech Republic, Denmark, Hungary, Latvia, Lithuania, Poland, Romania, Sweden, and the United Kingdom are all members of the EU and the last time I looked, none of them use the euro as their national currency - I could be wrong, but I can't be bothered to check just to refute the absurd proposition of some overpaid Euro-nebbish.  There is nothing stopping Greece reverting to their own currency and remaining in the EU.  Sure enough there are some issues, such as getting their capital contribution back from the ECB, but there is nothing under EU rules that would require them to leave the EU ... but don't expect anything other than self-centred power grabs from the unaccountable denizens of the Berlaymont.

Another one-way bet, this time against your gullibity

At the weekend the papers, well, actually the Observer, was full of talk about recessions, falls in GDP or perhaps the rate of growth of the GDP, the economy grinding to a halt (although they were actually referring to the rate of growth grinding to a halt), but most of all to a letter in the Observer from "100 leading economists" that the government was pursuing the wrong economic policies.

As it turned out, most of the authors weren't economists at all, but sociology lecturers and Labour party hacks, unseated MP's and other malcontents. Their prescription:

1. Don't sack any public sector workers
2. Spend more on welfare.
3. Borrow like there is no tomorrow.
4. Spend it all on projects we don't need and can't afford.

Does that remind you of any party's economic policy over the last 5 years?

So the press was well and truly primed for the announcement of GDP figures, when blow me, instead of showing a 0.1% increase, up popped a figure of 0.5%, confounding the "experts", and leading one to wonder from where they had pulled their 0.1% prediction, which they so confidently claimed was the cause of the malaise in the economy.

The truth is that this was just another bunch of left-wing chancers who had no more idea about the state of the economy than they knew about the weather on venus, but feeding a line at the weekend offered them a one-way bet. If the figures went down they would have made a successful pop at the government, while if the figures went up it would all have been forgotten by next weekend, and since none of them were "leading economists", no reputations would have been lost.

Back to the figures, as soon as they were released, the BBC ran a whole series of excuses, essentially that the Q3 figures looked good because of the royal wedding in Q2 (conveniently forgetting the national riots in Q3). But even that doesn't ring true. Given that the 50% of the economy that feeds directly of the government's teat (welfare recipients, public sector workers, pensioners) would have felt absolutely no difference because of the extra public holiday, that most self employed workers and manufacturing firms decided to decline the royal family's offer of a public holiday (the self employed pay for their own days off and manufacturing firms have to keep up production), the only firms who saw a reduction in output were salaried service workers (accountants and office cleaners).

But there is still one unanswered question:  How did "100 leading economists" fail to spot the Royal Wedding?

Giant vampire paella

MF Global, run by ex-Goldman senior partner Jon Corzine filed for bankruptcy last week. Corzine led MF Global into large positions on European sovereign debt. As plays on margin/yields, these only worked because of the large amount of leverage that he used. At the end of June, MF Global had borrowed $44.4 billion on $1.4 billion of equity.

The essence of the strategy was that there were severe discounts on some European government paper, and that by leveraging up with debt the firm could make a profit. Many of the Italian and Spanish bonds held by MF Global will mature in the next 2 years and are trading at less than 2% below par, but the firms built its position on the back of short-term funding and when that dried up (at least at a rate that made the trades profitable) the game was up. But whichever way you look at it, the deals never made sense. If the firm held mostly European government paper why should its funders charge any less than the yield on that paper? Given the other costs and potential for screw ups, they should be charging more. Which was why the firm couldn't find funding and went bust.

Corzine was at Goldman Sachs for nearly 25 years, rising to senior partner before being thrown outin a boardroom coup in 1999. He was a star trader who made winning bets, but somehow he seems to have made an elementary mistake. How did a former Goldman star makes such an elementary mistake? The answer is probably that it was never the star traders at Goldman who made the money but the risk management. After all, for most of its history the firm ran as a partnership, and while there may have many on the trading floor who put themselves forward as masters of the universe, it was the partners who were putting their own capital at risk. Not making a lot of profit is no fun, but it beats losing your shirt.

The proof of the calibre of Goldman trading stars versus the Goldman risk managers shows up when we look at other ex-Goldmen. John Thain, former Goldman CFO was fired by Merrill Lynch after they disclosed substantial losses. Thain had gone through the ML books in detail and them signed off, buut less than 12 months later, Merrill was in peril, sold to BofA and Thain was shown the door.

Robert Rubin, another star trader, went from being co-chairman of Goldman to Treasury Secretary and then went back to Wall Street to sit on the board of Citigroup as a senior adviser in the late 90s. Rubin best demonstrated the value of advice from traders. His advice: "Take more risk". Citibank, let us not forget, was renowned for its training programme, for its foreign exchange trading and its pre-eminence in loan syndication. The other side of Citigroup, the ex-Salomon, Smith, Barney, Travellers etc, probably needed no encouragement to take more risk, but needed to be kept under control. While Rubin was at Citi, its share price fell by 70%.

Another famous ex-Goldman star was J C Flowers, who left Goldman Sachs to set up his own fund to invest in financial institutions. At first he did well, making more than $1 billion on LTCB (now Shinsei Bank), but his latest fund has lost $4 billion of investors money, including quite a bit on MF Global.

But hey, in most of these cases, it was all OPM, and a one-way bet that didn't pay off. At least for the equity investors like Flowers whose money is now toast, or rather lunch for the bankers whose loans will now be extended and paid out by the underlying bonds.

Mandelslime's friend on corruption charges

The Serious Fraud Office have arrested and charged businessman Victor Dahdaleh with corruption offences relating to the supply of aluminium to Bahrain. Dahdaleh, who has British and Canadian nationality, is alleged to "have made payments of bribes" between 2001 and 2005 to officials of Aluminium Bahrain, a mainly state-owned smelting company in the Gulf state. The charge follows a two-year investigation by the SFO in collaboration with the US DOJ and the Swiss authorities.

Dahdaleh, 68, who lives in Belgravia, central London, has donated money to Labour causes. He funded Labour-supporting thinktanks, including the Institute for Public Policy Research and the Policy Network, a group founded by former prime minister Tony Blair and chaired by Mandelson.

Dahdaleh paid for a pamphlet authored by Mandelson, while both Mandelson and Blair appeared at events sponsored by the businessman. Mandelson called him "Victor, my friend" and said he was "a business dynamo, a public-spirited figure and a big-hearted personality".

Dahdaleh has been released on bail and is due to appear at City of Westminster magistrates court next Monday.

Given that we now know Mandelslime has been backed by someone charged with corruption, when will we know about the funding for his £8 million house.

Schauble: (verb) To open ones mouth without engaging brain

Fresh from his announcement of an immediate inquiry to discover why German accountants didn't offset assets and liabilities as they should (prediction: because they didn't realise they could be offset), German Finance Minister Schauble says the EU should take the lead in setting up a Robin Hood tax to curb speculation, and if the UK won't join in, then the EU should go it alone.

This is just so wrong he should count himself lucky if he still has a job tonight.  First off, there is no such thing as a Robin Hood tax.  Robin Hood never paid a penny to the Sherriff of Nottingham.  It is just a tax. 

More seriously, the EU has never had the power to impose any taxes, nor to collect them.  If the UK wants such a tax then it can impose it.  The EU and other nations would like the tax because it would be imposed mostly on businesses operating in the UK and employing mostly UK nationals. The EU of course have suggested that this tax should be paid into their coffers.

But realistically, it won't work.  If I want to speculate on an asset I dont have to buy it any more than I have to buy a race horse if I want to back it in the 3:30 at Kempton Park.  I can get a payoff without buying the underlying, and the trouble is I can manufacture whatever payoff I want through derivatives,  If I want the same payoff as an interest rate swap on £100m notional, I can write a swap for 100,000,000 times the fixed and floating interest rates on £1m notional and the tax becomes disappearingly small. The only way to reliably capture the value of a any speculation is to tax the profiut.  We already do that.

But most importantly, the easiest way to avoid any tax is to do the trade offshore, or if necessary move the trading entire business offshore.  There will always be offshore banking centres willing to take on any business that the EU wants to tax.  All we have to do is throw it away.

Germany no better off after error at ‘bad bank’

Unlike most trade presses, the financial press are largely ignorant of the subjects about which they write. Other media outlets are no better. As Exhibit #1, I bring to your attention the BBC's continual outpourings on Big Bang in 1986 and their implication that this led to today's financial crises, although the media and in particular the BBC have failed to explain how the abolition of fixed commissions and the distinction between jobbers and brokers had anything to do with the liquidity of Bradford & Bingley, RBS' overpayment for ABN Amro, AIG's build up of a massive unsupervised derivatives book in its London office and the failure of Lehman Brothers.

 The funny thing is that if you go to another pink paper and cut and paste text from their articles you get the following text:

 High quality global journalism requires investment.  See our T&Cs and Copyright Policy for more detail.

 .. and it is hard to disagree with that. Except that most financial journalism is not high quality. 75% of the "news" in the financial pages is simply a rehashing of corporate press releases. Once the journalists step away from those to what they think are real financial stories, they start to flounder.

Exhibit #2 is the story in today's pink paper with the headline that says the German government is €55.5 billion better off than previously thought because of an accounting error at FMS Wertmanagement, the bad bank for Hypo Real Estate.

True enough, there was an accounting error in the company which involved the failure by the banks accountants to set off collateral against a port folio of derivative products, which resulted in larger amounts than necessary being reported on both sides of the balance sheet.

If the hack concerned knew anything about finance he would have realised that offsetting assets and liabilities doesn't make you richer, and if he wasn't even that smart, he should realised that when the bank adjusted its balance sheet to show a lower value of assets by €24.5bn ($35bn) for 2010 and €31bn for the year to June 30 2011, then it could hardly be getting richer. Fortunately for the bank and the German government it also reduced the reported value of its liabilities by €24.5bn ($35bn) for 2010 and €31bn for the year to June 30 2011.

Go and look at the other paper now and you will find that they have backtracked, and rather than saying that they got the story wrong, they report that "Wolfgang Schäuble, German finance minister, has demanded an urgent inquiry into how an apparent accounting mistake led to an embarrassing €55.5bn overstatement of the debt burden of a “bad bank”.

Which is true, but it isn't the same as being €55.5 billion better off.

Capitalism is alive and well and living in Guangzhou and Bangalore

I have meant to post something along these lines for some time, and it may seem unduly negative, but I hope that it strikes a chord or two. Every time a BBC or Sky reporter talks about the economy for more than 5 minutes they usually get round to the issue of whether capitalism has "failed", without explaining what they really mean by failure.

Do you want the good news or the bad news? The good news is that what we see in the financial markets is not a crisis in the sense of an abrupt event that will lead to uncertainty and a deterioration of the financial and social position of the civilised world.  The bad news is that what we are seeing is part of a continuing process that preceded the last financial crisis and will continue into the future.

But it is not capitalism that has failed. Capitalism is alive and well, but not in the West - it has gone East. The spirit of capitalism - risk-taking, saving, investing, hard work - are to be seen in China, India, Indonesia, Korea and Japan.  In the 1960's we thought that those countries would be stuck in poverty, but while the last has risen to Western standards of prosperity the other four are growing fast.

Capitalism hasn't failed. Rather, just as water flows inexorably downhill, capitalism seeks out the greatest return on investment.  That doesn't necessarily mean seeking out the lowest cost but it does mean seeking out the sources of production that give the greatest return.  In simple terms, the West will not be able to compete with the East in some industries because the cost base in the East is much lower.  Until standards of living have grown in the East (and fallen in the West), then those industries will take place in the East.

What sort of industries are we talking about?  Well, most manufacturing including high value goods such as electronics.  Show me a telephone handset that was made in Europe or the United States and it will probably have been built in the 1980s.  Any western finishing is likely just to be customisation.

Show me a large factory in this country that has been built in the last 10 years, and chances are it will be involved in food processing, recycling or a similar industry that has to function locally.

So what is the problem in the West?  On the one hand, Western banks though the economy would grow for ever and were proven wrong, hence the massive number of bad housing loans.  But the bigger problem, which now hangs over Europe is the fact that politicians who were happy to open their borders for free trade failed to spot that this inevitably meant that their countries' own standard of living would inevitably be undermined.

At first it was easy to turn a blind eye, and just think that Eastern countries were backward places that were unlikely to compete with the West.  But inevitably, with their immeasurably higher populations and their improving standards of education, the West was going to be put under pressure by the lower costs in the East.  Westerners who were complacent about their prosperity failed to understand that although they were in the richest 10% of the world population, their position was not guaranteed.

The real failure, of course, and you won't hear this on the radio or TV, is not Capitalism but Socialism. We all learnt at the time of the collapse of the Berlin Wall that Socialism was unsustainable.  Unfortunately Western politicians on the left side of the spectrum didn't listen.  They found that companies didn't invest  when they put up taxes, and in fact moved all their new investment to other parts of the world.  In order to keep their captive voters happy, they borrowed heavily to finance present government consumption, which they erroneously called "investment". Leaving aside the Italian Cosa Nostra basket case, Greece, Portugal, Ireland and Spain,  the most heavily over-borrowed of the Eurozone countries, have all had one thing in common for the last 10 years: left of centre governments.  Just like the UK, currently the most over-borrowed of the lot.

You won't hear it on the BBC, but the real problem is that Western social welfare has placed an impossible burden on states, which is why the UK has a current annual deficit of €200 billion.  On its own this is 20% of the amount of funding sought by the EFSF, but worse than that, it is a recurring shortfall for which the UK government has to find funding every year.

How has this arisen?  Quite simply because in order to maintain the myth of never ending growth, Western governments have lavished stupendous salaries on their public sector workers and munificent largesse on welfare recipients, at the same time that private sector workers have seen their pay restricted largely by the pay levels of workers in the East.  Western workers naturally want to be paid more to maintain their living standards, but if they want to be paid more than their equivalent in Asia, their jobs probably aren't going to be around for long.

This was never a consideration for public sector workers who have long expected ever improving pay for the same productivity and performance, and have been largely insulated from and ignorant of the long term connection between private sector profitability and their own incomes.  Now that there is downward pressure on their pay because governments have really run out of cash public sector workers threaten strikes and riot.

Doctors expect to be paid hundreds of thousands of pounds to provide cradle-to-grave healthcare for many who have never and will never pay much into the state coffers, while civil servants expect six figure salaries, generous pensions and early retirement, all paid for by a private sector that is constantly undercut by overseas competition. In the long run, none of them should have any reason to expect to be paid much more than their Chinese or Indian equivalent as the economies of the East align themselves closer to those of the West. 

If the governments of Greece, Italy, Spain, Ireland, Portugal or the UK were companies, their respective cash shortfalls would have pushed them into insolvency years ago.  Their problems will continue until their spending is cut to realistic levels.

A few changes to the layout

I apologise to readers who may be experiencing disruption in visual quality, but I am experimenting with a new template.  I don't do CSS or anything webby for a living, so please bear with me for a few days as I tinker.

We have principles; if you don't like them we have others

According to press reports, China may contribute to the eurozone’s bail-out fund but the scope of its involvement will depend on European leaders satisfying some key conditions, according two senior advisers to the Chinese government. Any Chinese support would depend on contributions from other countries and Beijing must be given strong guarantees on the safety of its investment, according to Li Daokui, an academic member of China’s central bank monetary policy committee, and Yu Yongding, a former member of that committee. He added that Beijing might also ask European leaders to refrain from criticising China’s currency policy, a frequent source of tension with trade partners.

So there you have it. To bail out the cradle of democracy, Western leaders are being asked to turn a blind eye to human rights abuses.  The ancient Greeks had a word for that: eironeia.

The great Euro bailout that never was

A few years back when the UK last hosted the G20 boondoggle, the mentally deranged prime minister who chaired the meeting reported that the members of the G20 had agreed $5 trillion of stimulus measures.  That is a very big number.  Perhaps it was €5 trillion or £5 trillion, but in reality it didn't matter because the number was just a figure plucked out of thin air to satisfy the journalists and voters.  Most of the measures were not additional stimuli at all but programmes that were already in place such as export credit guaranty schemes or multilateral development banks.  The numerically largest measure involved the creation of SDRs, which didn't actually create any credit or stimulus at all, but was in effect like a bank printing lots of travellers cheques and putting them in a drawer until a customer used some cash to buy them.

I mention this because we are about to witness a similar exercise with the bailout of the euro.  Truly, none of the central political players have a clue, and the EU is putting out more desperate propaganda (e.g. "We are getting closer to an agreement" 2 days after the agreement was supposed to have been reached).

The reality is that there is never going to be a successful outcome until the governments change their attitude. Governments overborrowed, and they took that money from the banks.  Now the governments can't repay their loans, so the governments say they will have to write down their loans.  That would leave the banks very short of capital. 

"No problem", say the governments, "you will have to raise some more capital".  But where is a bank going to raise capital when it has 50% of the government backed assets on its books?  If private investors put up the money, they are likely to see their investment wiped out when the government default on the other half.

So who is going to put up the equity?  In the last resort, governments.  And where are they going to get the cash to do so?  From the banks.  You can see where this is going..

OK not the banks.  Let's try Mr Wen Jiabao's fast and easy loan consolidation shop. Cash within the hour and bad credit is no problem.  I don't think so.  And neither probably does Mr Jiabao, who can probably see that he probably wins if he lets the opportunity pass, but he almost certainly loses if he stumps up another penny to support European countries with a bad dose of fiscal diarrhoea.

But, back to the politicians, because the biggest pile of hype has yet to be fully disclosed.  The EU thinks that the banks should takje a 50% haircut on their Greek government bonds.  Fair enough because the current bonds are currently trading at a discount (i.e. for the innumerate at a higher yield than at issue).  A big discount, but hard to measure.  So what does the EU propose?  To swap the current bonds for bonds with a lower face value but a higher coupon. Some of the bonds will be backed by AAA rated collateral (yeah, until the rating on those European governments that haven't been downgraded gets fingered), but rather than taking a hit, it is likely that the position of the banks is unchanged. 

They get a hit in theory but they don't have to pony up any cash, and the yield on the new bonds will likely give the same value as the lower yield bonds they replace.  So what is the point? Beats me, but I guess Hermann Van Rompuy, and all the European leaders are none the wiser too.

One bum missing from the sofas

As we watch the post-Gaddhafi chat on early morning TV it strikes me that one perma-tan coloured smiley face is missing from our screens, an expert on all things Libyan with plenty of potential reminiscences about his dealings with the great man.

Unless he is prepared to give us some straight answers on Gaddhafi (and any dodgy money that flowed from Libya) why should we be interested in his views on other matters. It would be nice to think that we have seen the last of Blair, at least for a while, but that is probably too much to hope for from the BBC.

Do your homework

I have nothing against a good demo.  People need to let off steam from time to time, and I am quite prepared to see people do just that, with placards and the works, even if I don't agree with them.  A good demo shows that we still have free speech. Bad behaviour should not be tolerated, but if you have something to say, I am quite happy to listen.

Which is where the Occupy London Stock Exchange has got it so wrong, but ever-patient I am here to explain. So hear me out. You might learn something

• The London Stock Exchange has very little to do with the current financial crisis.  OK, I am sure you could come up with some claim about corporate greed, but that doesn't really ring true.  The current economic problems have been caused by a combination of (i) lending to poor credits and the securitisation of such assets, (ii) western governments holding down interest rates to fuel borrowing and consumption over many years, (ii) large and growing deficits.  Those at least, in no particular order are the biggest three.  There may be others, but none of them seem to related to the brokers at the London Stock Exchange.
• The London Stock Exchange is located at 10 Paternoster Square, but there is no exchange there.  The old Stock Exchange building was round the back of the Bank of England, but the trading moved out of there many years ago and switched to screen based trading way back.  So by all means, if you think it helps your cause, go ahead and upset the chief executive of the LSE, various compliance bods and the IT department, but you can bet your bottom dollar (if you actually have one), that trading would carry on seamlessly under some backup system if necessary.  They probably have systems on hot standby in Lewisham, Uxbridge or Enfeld waiting for just such an eventuality and they might welcome a test.
• The Church of England, and in particular St Paul's Cathedral has had remarkably little to do with the financial crisis.  I am sure you can try to drag them into the issue as "members of the establishment" or similar twaddle, but the rest of us don't see them as anything other than some of the lowest paid workers in the City of London.
• Don't put up pointless placards like "It's wrong to privatize the profits and socialise the losses", because that isn't what happened.  Private sector investors lost their shirts in 2008 when the banks went tits up.  Where governments stepped in they got shares for their cash.  They didn't just throw the cash away.  In theory the governments held the upper hand in negotiating bailouts because as well as being the equity provider of last resort, they were also the regulators determining how much equity the banks needed.  Private sector investors were unable to fix a fair price because they never knew from day to day whether their holdings would be forcibly diluted.
• And don't put up placards like some Americans saying "We want our money back from the banks".  First it wasn't your money, it was the tax payers'.  Second, it was paid back. In 2009, at a $4billion profit to the government and an annualised return of 15%. Asking for more is just plain greedy.

More on amateurism

I don't know whether it is the truth or the end result of a meme started by my last posting, but Paul Waugh of the Evening Standard has blogged today that Cameron appointed Chloe Smith to a Treasury ministerial post under the misapprehension that her 4 years at Deloitte entailed qualification as a Chartered Accountant.

According to Waugh, she disabused him of this idea .. before accepting the post, trusering a considerably higher ministerial salary than she could have ever expected as a spreadsheet jockey at Deloittes.

Still, with Cameron's "real world" experience limited to PR, we can hardly expect him to understand.

Amateurish isn't the word

Politics is often called show business for the ugly, and in one sense it is easy to understand why. Show business people are quick to grab a TV spot to tell us not just about their latest show, but also how they feel about things (as though we should care), or even going so far as to harangue us about feeding the poor whilst they avoid tax.

Politicians too seem to become more vain and self regarding as soon as they are elected, not really appreciating that all they did was worm their way into a position that had to be filled in any event and most people would choose to not suffer the indignities and hardships that go with becoming an MP.  The consequence is that MPs tend to be singularly witless and untalented bunch. There was a time when a number of talented professionals would grace the back benches, holding down a reasonable professional practice whilst attending parliament and representing a usually compliant constituency.

In these times of economic complexity we need some talented MPs to run the economic side of government.  What do we have?  First off there is Mr Osborne, whose total economic experience was working in the private sector, folding towels at Selfridges.  Then we have Mr Danny Alexander, who did a year of E in his PPE course at Oxford, but has no experience outside politics apart from 2 years of  PR for the Cairngorms National Park Authority.

Ah but, next came Justine Greening who was an accountant!!!  But not much of one compared to the many thousands who qualify every year.  Before parliament she worked for PricewaterhouseCoopers, GlaxoSmithKline and Centrica.  At the time that she was supposedly at the last firm, I advised them n several deals including the year long negotiation of 2 UK power stations.  I dealt with the FD, Head of Legal Affairs and his offsider, the Treasurer and his team, the Head of Tax and his team, and never once heard or saw any one called Justine Greening.  Straight from bean counting grunt to #3 in the Treasury team is not a bad move, but it speaks volumes for the competence of the rest of parliament.

But Ms Greening is now off to the Department of Transport (no doubt on the basis of Centrica's ownersip of the AA), and who takes her place?  Step forward the fragrant Chloe Smith, 29 year old alumnus of Deloitte Touche Tomatsu, another accounting firm.

But Ms Smith's career doesn't seem to have amounted to much.  She didn't work on the accounting side, but on the management consulting side where her financial experience will have been next to nothing.  In her 4 years at Deloitte it appears that she reached the giddy heights of "Analyst", and her page on the Treasury website says she used to work for "a leading international firm which advises private business, government departments and public bodies."  Sure they do.  And they also advise on choo-choo trains and doctors and nurses. But in her 4 years there following her degree in English Literature Chloe Smith probably did no more than prepare the spreadsheets and Powerpoint presentations and hand round the biscuits in meetings. That is what management consulting analysts do - not that I would want a management consulting partner anywhere near the levers of power.

What is most depressing is that with the western world in a financial mess and probably terminal financial decline, the best that the UK has to offer is a bunch of third rate lightweights.

So what are they going to say when Don Estridge dies?

Having spent all day listening to people blubbing about the newly iDead Steve Jobs, and how he "literally changed people's lives", although he "never actually met them", I despair of the tiny minded piss-poor lives that some people must lead.

I am not one of those Apple-haters, in the same way that I am not a Mercedes driver. I simply have different tastes, and my tastes in technology aren't really apple flavoured. I have never owned anything made by Apple, although I did work briefly for a Californian-based investment bank that used Macs for word processing. iPods have never produced a better sound than any other box of electronics with a $5 Digital-to-Analog converter, and the iPhone is just a phone, and probably not as good a phone as the competition - certainly not for the price.

I did have an i-thing once.  But it was an iPaq, a PDA from HP, and a useful thing it was too, doing most of the thing an iPad does now (web browsing, WIFI, reading documents, streaming video, bluetooth, MS Office applications etc) on a hand held device, only I bought this in 2003 for about £300.  Fast forward 8 years, and Apple gives me not much more on an iPad for 50% more price.  Where is Moore's law when you need it?

The truth was that since the early 1990's Apple has been less of a technology shop than a design shop with a less-is-more visual appeal.  While the rest of the world tried to cram as much technology into its boxes,. Apple's designs were nothing special tech-wise, but their look and feel gave them an edge with some buyers. Which is why, when IBM, Motorola, HP, Samsung and the rest have cupboards full of patents, Apple chooses to sue their competitors for selling rectangular boxes with rounded edges.

Still, if a man in black turtle neck jersey can cause such a stir, what are people going to say when Don Estridge goes to meet his maker?  Mr Estridge, after all, led the team that built the IBM PC.

A letter in today's Telegraph

Health Bill concerns 

SIR – As public health doctors and specialists, we are concerned about the Health and Social Care Bill. The Bill will do irreparable harm to the NHS, to individual patients and to society as a whole.

Of course, it will do no such thing. The NHS is a public organisation and can be reorganised at will. No change is irreversible, and no "harm", if any, is irreversible. 

It ushers in a degree of marketisation and commercialisation that will fragment patient care; aggravate risks to individual patient safety; erode medical ethics and trust within the health system; widen health inequalities; waste much money on attempts to regulate and manage competition; and undermine the ability of the health system to respond effectively to communicable disease outbreaks and other public health emergencies.

All of which is total nonsense. If we wanted to strip out the self interest from the NHS we would stop paying doctors salaries. Unfortunately for the rest of us, it seems that doctors are unwilling to work without financial compensation, so we have to pay them. Likewise, in order to get health organisations to provide the services we need, we have to pay them too, but in order to source those services on the most competitive terms we have to have some .... competition. 


All of which does nothing to stop the NHS responding to outbreaks of communicable diseases and other public health emergencies. If anything the process becomes more efficient.  And in case anyone thinks that is an exaggeration on my part, the response communicable diseases and similar health scares is handled by the Health Protection Agency which reports directly to the Department of Health.

While we welcome the emphasis placed on establishing a closer working relationship between public health and local government, the proposed reforms will disrupt, fragment and weaken the country’s public health capabilities.

No evidence given for this position. The reason for closer working is to give a better overlap between health and social care. It is well understood that one of the biggest future costs and also one of the current areas where productivity has to be improved is in care of the elderly, and this means getting the elderly out of hospitals and caring for them at home. 

The Government claims that the reforms have the backing of the health professions. They do not. Neither do they have the public’s support. The Health and Social Care Bill will erode the NHS’s ethical and cooperative foundations and will not deliver efficiency, quality, fairness or choice. We ask the House of Lords to reject passage of the Health and Social Care Bill

[Usual list of scores of self interested medics]

What they are really saying is that "Public Health" has long been the medical wing of the Labour Party with more interest in equality of outcomes than in maintaining the health of the nation per se, and best of all, the NHS pays them handsomely. NHS reforms would of course change a lot of that, with the abolition of the SHA's in which these Public Health types thrive.

But then we would hardly expect turkeys to vote for Christmas.

More morons from Brussels

So the EU wants to implement a Tobin tax on banks.

Algirdas Semeta, EU commissioner for taxation, customs, anti-fraud and audit, says: "Our project is sound and workable. I have no doubt this tax can deliver what EU citizens expect - a fair contribution from the financial sector." The unelected EU executive also points out that financial services are "in the majority of cases exempt from paying VAT (due to difficulties in measuring the taxable base)"

The EU forgets that the "contribution" from the financial sector was to take massive losses, costing shareholders but also losing a lot of jobs and bonuses in the process.  Many banks had equity injections from governments, but the governments got shares, and in many cases control of the banks.

The one entity that didn't actually put up any cash or take any losses was the European Union, but which now thinks it is due an extra £50 billion a year for doing absolutely nothing.  But then it has done that ever since its formation.

All hands on Dexia

Nice to hear the BBC comment on the plight of Dexia, the Belgian bank this morning, as its share price fell by 40% on rumours of a credit downgrade. This, they and their experts assured us was because Dexia was like another Northern Rock.

Well, up to a point. Dexia is a fairly recent creation formed from the merger of Crédit Communal de Belgique and Crédit Local de France.in 1996. The two predecessor banks were very similar, although they had very different histories, CCB going back to the 1860's and CLF going back to the 1980's.  What they both had in common was the fact that they were state owned and that they both specialised exclusively in lending to local authorities.

After their merger they expanded their focus to Italy and Germany and then to the United States and the rest of Europe, but all the while sticking to their knitting and sticking with credit activities for local government.  This led them to acquire FSA, a US based monoline credit insurer with a track record of wrapping municipal bond issues.  In 2008/9 they incurred large losses in FSA through their exposure to housing finance and also on their exposure to Depfa a German bank that also lent to local authorities.  This led to a bailout.

Which brings us up to the present,where we have a bank that has already been recapitalised, yetr is in deep trouble.  And its main exposure, in fact almost all of its risk assets, are European government entities that have overspent.  That is the real reason for the downgrade, not that you would ever hear that from the BBC.